Ally Financial, the Detroit-based finance provider, has said it remains focused on repaying the US Treasury Department, which owns $5.9bn (£3.8bn) in mandatory convertible preferred stock in the company.
The Treasury also owns 74% of Ally since bailing out the company with an injection of $17.2bn in 2010, of which approximately $6.1bn has now been repaid.
Ally, which operated finance on behalf of General Motors (GM) and its subsidiary brands between 2006 and 2012/13, was deemed to have failed the US Federal Reserve "stress test" for larger banks in March and is now in discussions to resubmit a capital plan to the regulator.
However, Jeff Brown, senior executive vice president of finance and corporate planning at Ally, said the company’s priority was the elimination of preferred shares held by the Treasury, which come with a 9% dividend and is not counted as capital by the Fed.
Sale, profit and subvention
So far, Ally’s mortgage subsidiary Residential Capital has filed for bankruptcy in the US while the company has sold off other mortgage business and much of its global motor finance operation back to GM.
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By GlobalDataGM has taken Ally’s business into its GM Financial operation and recently announced it will provide captive finance for GM brands Vauxhall, Opel and Chevrolet in the UK and Europe, among further markets and brands.
The sale of Ally’s international business has brought in 70% of expected proceeds, according to Michael Carpenter, chief executive at Ally. These funds are earmarked to repay the Treasury and have seen the company’s first-quarter profit rise to $1.1bn in 2013, from $310m in 2012, including a gain of $900m from the sale of Canadian operations.
Profit from retail car finance was up 42% year-on-year in Q1 to $343m while US consumer originations totalled $9.7bn, on a par with last year but up by 9% on the previous quarter. However, only $200m of the originations total was from subvented loans through Chrysler, down from $500m in Q1 2012, and $300m in Q4 2012, as Ally saw a reduction in its manufacturer agreements.
richard.brown@timetric.com
