By Saabira Chaudhuri
Ally Financial Inc.'s first-quarter profit surged as the
government-controlled auto lender reported a $900 million gain on
the sale of its Canadian operations, while core pre-tax income also
climbed.
Ally is 74% owned by the U.S. government after receiving $17.2
billion in funds through the Treasury Department's Troubled Asset
Relief Program during the financial crisis. The former in-house
financing arm for General Motors Co. (GM) has been working to
distance itself from mortgage woes that had been a drag on its
financial results and shed international businesses to repay its
bailout.
On Wednesday, Ally said that including dividends and interest,
it will have paid about $6.1 billion to the U.S. Treasury as of May
15, reflecting more than one-third of the investment made in the
company.
Chief Executive Michael A. Carpenter said the majority of Ally's
international businesses have been sold and the company received
more than 70% of the total expected proceeds. Ally has exited its
remaining mortgage businesses.
The company's core auto-lending business, which mainly finances
General Motors Co. and Chrysler Group LLC dealers and customers,
posted an operating profit of $343 million in the latest period, up
42% from a year earlier but down 7.5% from the fourth quarter.
Meanwhile, the insurance unit reported an operating profit of
$61 million, down 39% from a year ago but more than double the $27
million in operating profit reported in the fourth quarter.
The mortgage unit reported an operating loss of $6 million
versus income of $63 million a year ago and $99 million in the
prior quarter.
Ally reported an overall profit of $1.1 billion versus a profit
of $310 million a year earlier. The core pre-tax loss, which
reflects continuing operations before taxes and some expenses, was
$6 million compared with income of $111 million a year ago.
Excluding repositioning items mainly related to the sales
agreements for Ally Bank's mortgage servicing rights, the company
reported core pre-tax income of $207 million.
Last May, Ally's subprime mortgage subsidiary, Residential
Capital, filed for Chapter 11 bankruptcy, a move intended to shield
the parent company from mounting litigation over soured mortgage
securities and looming bond payments.
But Ally's ongoing ties to ResCap have continued to create
obstacles for the auto lender, including hindering the approval of
its capital plan and making Ally a target an ongoing dispute with
creditors of the mortgage subsidiary over actions they allege the
parent company took to strip ResCap of valuable assets before its
bankruptcy.
Write to Saabira Chaudhuri at saabira.chaudhuri@dowjones.com
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