Net income fell to $91 million from $384 million a year earlier, the Detroit-based bank said today in a statement. Results included a charge for last month’s accord over faulty home loans sold to U.S.-backed firms in the run-up to the 2008 financial crisis. Core pretax income slid to $269 million, or $271 million excluding certain one-time expenses, compared with $373 million a year earlier, Ally said.
Chief Executive Officer Michael Carpenter has sought to cap Ally’s costs from soured mortgages that led to a $17.2 billion government bailout and left the U.S. Treasury Department with a 74% stake. He’s resolving claims tied to the bankruptcy of the Residential Capital mortgage unit and refocusing Ally on its auto loans and online bank.
“Ally’s overall financial profile continues to improve as our strategic transformation nears completion,” Carpenter said in the statement. Priorities include improving profitability and paying back the government, he said. Ally said its pipeline of pending home loans now stands at zero, and Jeff Brown, Ally’s senior executive vice president for finance, said the U.S. accord represents the last significant mortgage expense.
The firm, which doesn’t have publicly traded shares, has filed for an initial stock offering. The deal was put off until ResCap’s status and Ally’s liability were resolved, Carpenter said today during a conference call that it might be possible for private investors to buy out the Treasury’s stake.
The accord with the Federal Housing Finance Agency and Federal Deposit Insurance Corp. cost the firm $170 million, equal to $107 million after taxes. The agreement ends all pending litigation and guarantees the agencies won’t object to the reorganization plan for ResCap, once among the nation’s largest subprime home lenders.
Ally said in August it was raising $1 billion in a private placement as part of a plan to pay $5.9 billion to buy back preferred shares held by the U.S. The private-placement must be completed by Nov. 30.