Ally Financial said that its loss in the second quarter widened due to higher provisions for soured vehicle loans and mortgage settlement.
Net loss during the second quarter jumped to $927 million, compared with $898 million in 2012, including the $1.6 billion payment for the settlement with creditors regarding the bankrupt mortgage unit, according to Residential Capital LLC. The core pretax profit dropped 24% to $201 million from $263 million.
Auto finance pretax income dropped 13% to $382 million, compared with $440 million in 2012, the company put aside more cash for future loan losses. CEO Michael Carpenter’s plan to pay back Ally’s $17.2 billion taxpayer bailout has been postponed by lawsuits related to ResCap, once considered by the CEO as “millstone around the company’s neck.”
“We can now put that tumultuous chapter behind us,” said Carpenter. “Ally’s strategic transformation is nearing completion.”
A stock sale might help Ally raise around $1 billion and be able to pass the Federal Reserve’s annual stress test, according to an anonymous source. Ally, once known as GMAC, was owned by GM until 2006, when the car maker sold 51% to Cerberus Capital Management LP. In 2008 the US government took a 74% stake for a package of financial aid which helped the company from collapsing due to bad subprime mortgages.
“We’re very focused on what’s the exit strategy for the U.S. Treasury,” Carpenter said May 1 during a conference call with analysts. “If I had to put money on it right now, I would say the IPO is the best alternative.”