Ally Financial 1st-Quarter Profit Surges on Gain; Core Income Also Climbs

   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 [e-mail]

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