Ally records third-quarter turnaround to $356 million net income

Article by Christian A., on October 31, 2014

Ally Financial Inc. recorded a turnaround in fortunes in the third quarter of 2014, jumping from a net loss in the same period in 2013. The company logged $356 million (74 cents per share) in net income applicable to common shareholders in the third quarter this year, compared to $109 million (27 cents per share) in losses in the same period last year.

Ally attributed the turnaround to higher demand for loans from car dealerships. Ally was expected to post a net income of 41 cents a share in the third quarter, according to consensus estimates of analyst surveyed by Thomson Reuters I/B/E/S.

Ally saw its commercial auto loan balances -- including the financing of dealers' inventories, real estate and other operations – jump around 11 percent to around $31 billion, or nearly double the growth in consumer auto loan balances in the same period.

It got $11.8 billion in consumer auto loans in the third quarter for a 23-percent surge driven by a record quarter in used-car loans. Ally’s bottom line was boosted by expected lower loan losses. It has allotted 38-percent less budget for future loan defaults at $109 million, despite a rise in the share of borrowers behind on their payments to 2.28-percent.

Last month, The United States Treasury Department has started a second trading plan, which forms part of its efforts to slash its shareholdings in Ally Financial Inc. The Treasury used to own a 16-percent stake in Ally in August, but the first trading plan has allowed it to cut its stake in Ally to 13.8 percent, or around 66.2 million shares of the company’s common stock.

Charmian Uy, Chief Investment Officer, noted that the further sale of the common stock would continue efforts to slash the investment in Ally and the Troubled Asset Relief Program (TARP). He added that the second trading plan would allow the Treasury to exit from Ally in such way that it “balances speed of exit with maximizing the taxpayer’s return.”

The Treasury sold around 8.9 million shares in the first trading plan, allowing it to recover about $218.7 million for taxpayers. The Treasury has so far recovered about $18 billion from its Ally investment for taxpayers. This is around $873 million more than its original bailout investment at around $17.2 billion.

Ally was bailed out during the financial crisis through TARP, with the Treasury owning up 74 percent of the company. The Treasury has since been reducing its stake in Ally.

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