A drop in net auto receivables and a nearly five-fold jump in a provision for auto loan losses contributed to the decline in pre-tax income Ally Financial recorded last quarter.
Ally’s auto finance division posted pre-tax income of $382 million for the quarter, down 13.2% from the prior-year period.
Ally was the largest auto finance company in the nation last year by outstandings.
Notable year-over-year changes include:
- A 19.0% drop in net auto receivables, to $85.6 billion
- A 486.7% increase in auto loan-loss provisions, to $88 million
- A 46.4% decline in “other” revenue, the result of 2Q12 gains on whole-loan sales that did not repeat
- The portion of Ally’s business that stems from Chrysler loan transactions fell to 15.6% from 28.4% in 2Q12, on the heels of the newly created Chrysler Capital venture with Santander Consumer USA
Despite the lower income and a 6.7% drop in 2Q originations (see chart at left), Ally’s U.S. auto earning assets increased 10.3% year-over-year, to $102.3 million.
Overall, Ally lost $927 million last quarter ― primarily the result of a $1.6 billion charge to repay creditors of bankrupt mortgage unit Residential Capital LLC ― compared with an $898 million loss in the year-prior period.
Resolution of the ResCap bankruptcy and the sale of a number of Ally’s international operations have strengthened the government-owned company, said Chief Executive Michael Carpenter in the earnings report today.
“As we move into the second half of the year, Ally’s strategic transformation is nearing completion,” Carpenter said. “The comprehensive settlement agreement between Ally, ResCap and ResCap’s major creditors marked a watershed moment, and we can now put that tumultuous chapter behind us. In addition, the vast majority of the international businesses have been sold and 84% of the total expected proceeds were received. These actions have helped to strengthen Ally and best position the company to return the remaining investment to the U.S. taxpayer.”
