Back to Headlines Print Version Buzz Up Stumble it Tweet it Facebook LinkedIn

GMAC 3Q Loss Narrows On Higher Revenue, Lower Loss Provision

DOW JONES NEWSWIRES

GMAC Financial Services' third-quarter loss narrowed substantially as the lender posted soaring revenue and much lower provisions for loan losses.

"Progress is being made toward the transformation of the company as we shed nonstrategic operations while at the same time invest in structuring the company to be more competitive for the long term," said Chief Executive Alvaro G. de Molina.

GMAC, which finances vehicles from General Motors Co. and Chrysler Group LLC, expanded its business into real estate, commercial finance and auto insurance in recent years, only to be battered by weakness in housing and automobiles. Although it became a bank-holding company to receive billions of dollars in federal aid and now has the option of an initial public offering because of its new structure as a corporation, regulators aren't persuaded the lender is out of the woods.

Currently, GMAC is resisting a push by the Federal Reserve for it to take billions more in federal aid because of worries about its capital levels.

GMAC posted a loss of $767 million, from a year-earlier loss of $2.52 billion. Excluding mortgage-repurchase expenses, tax benefits and mark-to-market gains, among other items, the company's loss from continuing operations was $77 million. GMAC didn't provide a year-earlier figure.

Revenue rose 76% to $2.11 billion.

Credit-loss provisions fell 36% to $704 million from a year earlier and 39% from the previous quarter.

GMAC's automotive-finance unit swung to a $395 million pretax profit as total new-vehicle financing originations dropped 26% to $6.8 billion from a year earlier but increased 21% from the second quarter. The increase came on the back of better pricing, increase in Chrysler originations and the impact from the cash-for-clunkers program.

Auto delinquencies increased to 3.76% in the third quarter from 2.77% a year earlier and 3.48% in the second quarter. Delinquency trends have been negatively affected by higher unemployment and a smaller asset portfolio in North America and Europe.

The loss in the company's mortgage operations narrowed. An expense of $515 million to increase repurchase reserves was more than offset by stronger net revenue driven by improved core business margins and higher net servicing revenue. Mortgage-loan origination was down slightly from the previous quarter because of lower refinancing volume.

-By Joan E. Solsman, Dow Jones Newswires; 212-416-2291; joan.solsman@ dowjones.com

   (Updates to add details)

   By Aparajita Saha-Bubna
   Of DOW JONES NEWSWIRES

Profitability continued to elude GMAC Inc. in the third quarter amid persistent losses stemming from souring mortgage loans.

Despite extraordinary help from the U.S. government--including $12.5 billion of federal funds and access to cheap debt--GMAC is struggling to return to the black as it takes hit after hit on its mortgage unit, Residential Capital LLC. ResCap, one of the largest lenders to borrowers with shaky credit, is still reeling from risky loans to borrowers with shaky credit.

The extent of federal help GMAC has received underscores the auto lender's role in federal efforts to resuscitate the ailing auto makers General Motors and Chrysler. GMAC provides loans to auto dealers that use the funds to stockpile their inventory of new vehicles. It also lends to consumers buying cars.

The auto lender posted a third quarter loss of $767 million, from a year- earlier loss of $2.52 billion. ResCap alone lost $649 million in the third quarter, offsetting earnings, before taxes, of $395 million from continuing operations at GMAC's auto business.

Financing of new car loans totaled $6.8 billion in the third quarter, down from $9.2 billion a year ago but up from $5.6 billion in the second quarter. The increase from last quarter includes improved pricing competitiveness, an increase in Chrysler originations and the effect of the "cash-for-clunkers" program. Auto delinquencies increased to 3.76% in the third quarter from 2.77% a year earlier and 3.48% in the second quarter.

All told, GMAC has gotten $12.5 billion under the Treasury's Troubled Asset Relief Program bailout funds; it is in talks with the Treasury to get a third infusion of $2.8 billion to $5.6 billion.

-By Aparajita Saha-Bubna and Joan E. Solsman, Dow Jones Newswires; 617-654- 6729; aparajita.saha-bubna@dowjones.com

   (Updates to add company's comments from a Web cast and additional details)

   By Aparajita Saha-Bubna
   Of DOW JONES NEWSWIRES

Profitability continued to elude GMAC Inc. in the third quarter amid persistent losses stemming from toxic mortgage loans.

Despite extraordinary help from the U.S. government--including $12.5 billion of federal funds and access to cheap debt--GMAC is struggling to return to the black as it takes hit after hit on its mortgage unit, Residential Capital LLC. ResCap, one of the largest lenders to borrowers with shaky credit, is still reeling from risky loans it made at the peak of the real estate market.

The U.S. government currently owns 35.4% of GMAC and is its largest shareholder. The extent of federal help GMAC has received underscores the auto lender's role in federal efforts to resuscitate the ailing auto makers General Motors and Chrysler. GMAC provides loans to auto dealers that use the funds to stockpile their inventory of new vehicles. It also lends to consumers buying cars.

The lender posted a third quarter loss of $767 million, compared to a year- earlier loss of $2.52 billion. But the extent of GMAC's loss narrowed from a year ago as revenue jumped to $2.1 billion from $1.2 billion a year earlier.

The third quarter loss narrowed also because the company squirreled away a smaller amount--$704 million--to reserve for potential losses. This is down from $1.1 billion a year ago and $1.2 billion in the second quarter.

GMAC's mortgage business, including ResCap, lost $747 million, before taxes, from continuing operations. ResCap alone lost $649 million in the third quarter, its 12th consecutive quarterly loss.

GMAC said it is focused on resolving matters at ResCap. The company's objective is to find a resolution by the end of the year, said Robert Hull, GMAC's chief financial officer, during a Web cast Wednesday morning discussing the company's third quarter results. This time frame is "not a promise but an objective," said Hull. He declined to discuss the options being considered for ResCap. Losses at ResCap totaled $9.96 billion in 2008 and 2007.

The red ink stemming from faulty mortgages offset earnings, before taxes, of $ 395 million from continuing operations at GMAC's auto business.

Financing of loans for new cars totaled $6.8 billion in the third quarter, down from $9.2 billion a year ago but up from $5.6 billion in the second quarter.

Last year, GMAC, strapped for capital and struggling with mounting losses on its auto and mortgage loans, dramatically shrank its lending operations.

To survive, GMAC registered as a bank in December, giving it access to the Treasury's Troubled Asset Relief Program bailout funds and allowing it to borrow at cheaper rates. All told, GMAC has gotten $12.5 billion in TARP funds; it's in talks with the Treasury to get a third infusion of $2.8 billion to $5.6 billion.

GMAC has to raise this capital to satisfy the requirements of the government- conducted stress tests earlier this year. Hull said discussions with the Federal Reserve related to the capital raise have been "helpful and constructive."

Deposits--a central plank of GMAC's funding strategy--at Ally Bank, the company's re-branded online banking unit, increased to $28.8 billion, up from $ 17.6 billion a year ago and $26.3 billion in the second quarter.

-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; aparajita.saha- bubna@dowjones.com

  (END) Dow Jones Newswires
  11-04-090855ET
  Copyright (c) 2009 Dow Jones & Company, Inc.