Ally Financial Inc. expects to report net income in the $90-million-to-$110-million range when it releases fourth-quarter 2013 earnings on Feb. 6, according to an 8K filed with the SEC. The estimate includes a $98 million pre-tax charge stemming from consent orders issued last month by the Consumer Financial Protection Bureau and the U.S. Department of Justice.
The high end of Ally’s estimate ― $110 million ― would mark a 20% increase from third-quarter earnings, which totaled $91 million.
In the past two years, though, Ally’s earnings have fluctuated wildly, from nearly $1 billion of losses to more than $1 billion of gains. For instance, in the second quarter of 2012, charges related to beleaguered mortgage unit Residential Capital LLC prompted an $898 million loss. Ally reported another loss ― $927 million ― in 2Q13. By comparison, in 4Q12 and 1Q13, Ally reported net income of $1.4 billion and $1.1 billion, respectively. Those big numbers were the results of strong gain-on-sale revenue in mortgage operations, tax implications, and a sale of Canadian operations.
In the remaining three quarters of 2012 and 2013, earnings were $310 million (in 1Q12), $384 million (in 3Q12), and $91 million (in 3Q13). For the final quarter of 2013,
In December 2013, Ally said it was focused on “profitable dealer relationships, prudently increasing earning assets, and delivering higher risk-adjusted returns.” The company said its total retail loan and lease originations in the U.S. were $38.7 billion in 2012, and $29.2 billion in the first nine months of 2013.
Separately, the Jan. 10 SEC filing also noted that Ally’s company’s board approved a measure that would restrict certain shareholders from increasing their stake in the company. The move is largely seen as a precursor to the government’s exit as Ally’s biggest shareholder. It’s unclear if the move signals a faster-than-expected exit. A Treasury spokesman declined comment.
“An IPO continues to be a viable option for the company; however, no final decisions have been made,” Gina Proia, spokesperson for Ally Financial told Auto Finance News.
Nonetheless, the protective amendment would preserve tax benefits that otherwise could be significantly limited if the company were to experience an ownership change. The amendment generally restricts transfers of Ally shares in excess of 4.99%, subject to certain exceptions. This mechanism has been used by a number of other companies, including those that had TARP common equity investments according to Proia.
What a great industry to be associated with. Housing may not ever return to the levels it once was but subprime auto finance certainly has a greater chance of full recovery. It’s a good time to be a “cargirl”.