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Ally Financial Reports Preliminary Third Quarter 2012 Financial Results
NEW YORK, Nov. 2, 2012 --
Ally Financial Inc. (Ally) today reported net income of $384 million for the third quarter of 2012, compared to a net loss of $898 million in the prior quarter and a net loss of $210 million for the third quarter of 2011. The company reported core pre-tax income of $559 million for the third quarter of 2012, compared to a core pre-tax loss of $753 million in the prior quarter and core pre-tax income of $119 million in the comparable prior year period. Core pre-tax income/loss reflects income from continuing operations before taxes and original issue discount (OID) amortization expense primarily from bond exchanges.
Results for the quarter were driven by continued strong and stable performance in the Global Automotive Services business, resulting from earning asset growth from a more profitable origination mix, despite intensifying competition for auto finance assets. Performance was also impacted by strong gain on sale revenue and favorable mortgage servicing rights (MSR) activity, net of hedge, in Mortgage Operations.
"Ally's third quarter results demonstrated the strength of the core fundamentals of the business," said Ally Chief Executive Officer Michael A. Carpenter. "The U.S. auto finance franchise continued to produce strong and consistent results despite a highly competitive market, with earning assets up 21 percent and net financing revenue up 22 percent from last year. In addition, the insurance business had the highest level of written premiums since 2008."
Carpenter continued, "Ally Bank again demonstrated the potential of this leading franchise with retail deposits up 22 percent and customer accounts up 24 percent year-over-year. The Bank was also recognized as the Best Online Bank by MONEY® Magazine.
"Ally has achieved significant momentum in its strategic plans, and reached agreements to sell businesses that hold about half of the approximately $30.6 billion in assets from its international operations, with a pre-tax estimated $1.2 billion gain on sale. Definitive agreements were reached for the Canadian operations and Mexican insurance business in October, and we expect to identify plans for the remaining operations in Europe and Latin America this month," said Carpenter.
Carpenter concluded, "Also in October, Ally Bank announced it began a process to evaluate strategic alternatives for its agency MSR portfolio and mortgage business lending operation, which is another step in its plan to effectively exit the agency mortgage business. The steps we are taking, coupled with the strength of the underlying auto finance and direct banking franchises, will support Ally's plan to repay the remaining U.S. Treasury investment and thrive going forward."
Strategic Actions Update
On Oct. 17, Ally announced it had reached a definitive agreement to sell its Mexican insurance business, ABA Seguros, to the ACE Group, one of the world's largest multiline property and casualty insurers. The transaction has a purchase price of $865 million, a substantial premium over the $430 million approximate book value of the operations as of Sept. 30, 2012. The transaction is subject to regulatory approvals.
Looking ahead, the sale approval hearing before the bankruptcy court will commence on Nov.19, 2012. Additionally, Ally continues to fully cooperate with the court-ordered examination which continues to move forward. Ally remains prepared and confident that the remaining aspects of the Chapter 11 cases will be resolved to Ally's satisfaction. As with any legal process, timing and the outcome can never be guaranteed; however, Ally is focused on receiving a full recovery in the ResCap cases and moving forward with its core businesses.
Liquidity and Capital