Ally CEO expects IPO in late 2011

August 4, 2010 http://detnews.com/article/20100804/AUTO01/8040319

Ally CEO expects IPO in late 2011

Former GMAC will be ‘solidly profitable’ rest of year, he says

DAVID SHEPARDSON
The Detroit News

Ally Financial Inc. is on track to launch a public stock offering late next year, and reported a net profit of $565 million in the second quarter on higher revenue and better operating results.

Ally CEO Michael Carpenter, who took over in November, said Tuesday the Detroit-based bank holding company and auto and mortgage lender was on track to go public in the latter part of 2011.

In an interview, Carpenter said the company would be "solidly profitable" in the second half of 2010, but said the profits might not be as "ebullient" as those in the first half.

He said a successful IPO for General Motors Co., due by year’s end, "would really set the stage for us."

The government infused $17.2 billion into Ally and owns a 56.3 percent majority stake. The most recent government estimate is taxpayers will lose $6.2 billion on their bailout of Ally.

Carpenter said Ally, which until recently was known as GMAC, was steadily removing more risky assets from its books and was performing ahead of plan.

Since 2007, Ally has recorded $14.5 billion in losses from its portfolio of residential mortgages — once as high as $125 billion.

By year’s end, Ally should have no more than $10 billion in mortgages, representing more than 15 percent of its balance sheet.

Those assets are much less risky than in the past, and its ResCap unit made a profit in the second quarter. But what Ally must decide is whether it remains in the mortgage origination business.

In the first half of 2010, Ally earned nearly $730 million, compared with a $4.6 billion loss in the first six months of last year.

The company is the primary lender to General Motors Co. and Chrysler Group LLC. It underwrote 60 percent of Chrysler’s retail sales in June.

Carpenter told analysts and reporters on a conference call that the company’s success was based on auto dealers opting to use it for financing.

"The dealers determine our success — not the (automakers)," Carpenter said. He added that "GM and Chrysler are our partners."

He noted that while some banks are re-entering the auto lending business, "they fled the sinking ship as fast as they could" during the credit crisis.

Carpenter said 1,400 Chrysler dealers wouldn’t be in business if Ally hadn’t stuck by them.

"The dealers would have gone out of business — and they know that," Carpenter said. "We are not a bank where this is a product line that’s sometime in favor. … We’re there in the good times and bad for dealers."

But GM has announced plans to acquire a subprime lender, AmeriCredit, for $3.5 billion, and Chrysler Financial, which has been in wind-down, is considering returning to new lending. Some auto analysts think GM could eventually use AmeriCredit like GMAC was for nearly 90 years: its captive finance arm.

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