Ally Financial Reports 37 Percent Fall In Q3 Profit

Ally Financial Inc., the largest U.S. auto loan company, reported a 37 percent fall in quarterly profit as the firm adapts to lost leasing business from GM.

Net income fell to $268 million, or 47 cents per share, in the third quarter from $423 million, or 74 cents per share, one year earlier. Last year’s third quarter numbers included $130 million in income derived by exiting a joint venture in China and a one-time tax benefit from the sale of mortgage servicing operations.

The company has been attempting to increase its market share by financing cars manufactured by Ford and Nissan, after General Motors replaced Ally as the exclusive lessor for Buick, GMC and Cadillac vehicles in February of this year.

“Ally’s third quarter results demonstrate the ongoing strength of the operations and continued progress on our goals to diversify the business, achieve our financial targets and build upon our leading digital platform,” said Ally CEO Jeffrey Brown. “Auto originations were strong at $11.1 billion for the quarter and $31.7 billion year-to-date, and we remain on track to surpass our target for the year, despite the shifts in business. The business is well-positioned in the marketplace, increasingly more diversified and poised to provide consistent returns.”

Chief financial officer Christopher Halmy explained Ally saw slight deterioration in credit performance in comparison to a year ago, a trend that has now continued over several quarters. He said that the deterioration reflects a decision that the company made a few years ago to take on riskier loans, but that credit was performing as expected.

“We’re seeing no real credit trends that are disturbing,” said Halmy.

Total auto loans made by Ally were down 6 percent at $11.1 billion, with the company describing the decline as reflecting its increased emphasis on loans for car purchases, as opposed to leases, and differences in how it accounts for those assets on its balance sheet.

The company’s income from auto financing fell 16.4 percent to $347 million, while income from dealer financing decreased 18.5 percent to $387 million. At the same time, according to a report from Guggenheim Securities analyst Eric Wasserstrom, Ally has made good progress reducing its expenses and lowering funding costs.

Ally is still awaiting regulatory approval for the redemption of $1.3 billion in preferred securities related to the billions in emergency loans that the federal government provided to the company during the financial crisis. Ally must redeem the securities before it executes any plan to return capital to shareholders.

“As we look ahead, our opportunities lie in our inherent strengths – a strong culture of agility and innovation, a proven track record in digital financial services, a respected customer-centric brand, and a foundation of 5.5 million customers,” explained Brown. “We have taken initial steps in deepening our customer relationships and expect to expand our customer offerings in the year ahead.”