Ally Financial Inc, the auto and mortgage lender majority-owned by the U.S. government, posted its fourth consecutive quarterly profit as it prepares for an initial public offering this year.
The company, formerly the finance arm of carmaker General Motors, said it made more North American auto loans and leases in the quarter than a year earlier. It also set aside less money to cover bad loans because it is experiencing fewer credit losses.
Bad mortgage loans forced taxpayers to bail out Ally multiple times in 2008 and 2009 with more than $17 billion of cash injections.
The company’s mortgage woes continued into 2010, when some borrowers argued that Ally was improperly foreclosing on homes. Ally said on Tuesday it has found no evidence of bad repossessions.
As the company’s mortgage problems abate, the government is getting ready to exit its investment in Ally. In December, the government agreed to convert $5.5 billion of its Ally preferred shares into common stock, leaving taxpayers with a 73.8 percent stake in the company.
That conversion gives Ally a stronger balance sheet and leaves it better positioned for an IPO this year, the company’s chief executive said on a conference call.
“As we go into 2011, it’s all about paying back the U.S. Treasury, it’s all about improving our cost of funds, and it’s all about making our auto franchise even stronger,” said CEO Michael Carpenter.
Ally is also looking to build its banking business and take advantage of opportunities in the mortgage market, Carpenter said.
The company posted net income of $79 million for the fourth quarter, compared with a loss of $5 billion a year earlier, when it suffered from big mortgage writedowns.
Ally’s car loan and dealer financing business posted income from continuing operations of $765 million, more than double the year-earlier $283 million.
Most of the increase came from North America, where income from continuing operations rose 72 percent to $589 million.
New auto loans, particularly in the United States, spiked to $9.3 billion in the fourth quarter from $5.9 billion a year earlier.
The company said it had resolved the majority of problem foreclosure cases at subsidiary GMAC Mortgage.
GMAC Mortgage — along with several other large U.S. mortgage servicers — temporarily suspended foreclosures last fall amid allegations that the industry used incomplete paperwork and cut corners to process thousands of home seizures.
At the end of the 2010 third quarter, GMAC Mortgage identified 25,000 foreclosures as having possible documentation issues. The company said it had resolved all but 2,548 cases and had not found evidence of inappropriate foreclosures.
GM sold a 51 percent stake in Ally, then known as GMAC, to a group of investors led by Cerberus Capital Management in 2006. Cerberus and affiliates now have 8.9 percent of the company, third party investors have 7.4 percent, General Motors Trust has 5.9 percent, and GM has 4 percent.
