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Nov-04-2009GMAC Reports Third-Quarter Loss Tied to Loan Defaults(topic overview)
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NEW YORK — GMAC Financial Services, the main lender for General Motors Co. and Chrysler Group LLC, said Wednesday it lost $767 million in the third quarter, as its struggling home mortgage unit continued to weigh on its results. The company said its auto lending unit turned a profit during the quarter and its mortgage unit, ResCap, posted a smaller loss than last year. [1] NEW YORK — GMAC Financial Services says its net loss narrowed in the third quarter as its auto-lending unit turned a profit. The former lending arm of General Motors Co. says its results continued to be weighed by losses in its struggling home-mortgage unit, though the loss was smaller than last year. GMAC said Wednesday that its loss fell to $767 million, compared with $2.52 billion a year earlier.[2]
NEW YORK — GMAC Financial Services, the main lender for General Motors Co. and Chrysler Group LLC, said Wednesday its loss narrowed to $767 million in the third quarter, as its auto lending unit made money while its home mortgage unit reported another loss.[3]
DETROIT ' GMAC Inc. pared its losses during the third quarter as its auto lending unit turned a profit. The former lending arm of General Motors Co., which also goes by the name of GMAC Financial Services, said today its results continued to be weighed by losses in its struggling home mortgage unit.[4]
The unit has been hit hard by the downturn in the housing market and lost $747 million during the quarter. That's down from a $1.95 billion loss last year. Its auto-financing unit turned a profit of $395 million, compared with a year-ago loss of $379 million. GMAC, which is in the process of taking over lending for Chrysler, said its lending to Chrysler customers more than tripled in the third quarter. [1] One bright spot was the company's auto-financing unit, which reported a profit of $395 million, compared with a year-ago loss of $379 million. GMAC said its lending to Chrysler customers more than tripled in the third quarter to $720 million. Earlier this year, the company became the preferred lender for Chrysler.[3]
GMAC has already received $12.5 billion in loans from the U.S. government, which owns a 35 percent stake in the company. GMAC is a crucial player in the auto industry, providing loans for a large number of GM and Chrysler dealers to pay for the dealers on their lots. It also provides retail financing to many of their customers. GMAC said its net loss was $767 million versus a loss of $2.52 billion in the same quarter last year. The company said the results were hurt by several one-time items and by a handful of business lines that the company is discontinuing, including its consumer property and casualty insurance business and three international auto financing operations. Excluding these items, the company said it lost $77 million. GMAC said its ResCap mortgage-lending unit continued to struggle.[3] The third-quarter net loss for Detroit-based GMAC was $767 million, compared with a loss of $2.5 billion a year earlier. GMAC's auto finance unit had a profit of $395 million in the quarter, while its mortgage operations posted a loss of $747 million.[5]
GMAC, the traditional lender to General Motors Co, has received $12.5 billion in government bailouts, and reported a third-quarter net loss of $767 million, compared with a loss of $2.5 billion a year earlier.[6]
"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.[7]
GMAC's owners include automaker General Motors and the private equity firm Cerberus Capital Management LP. GMAC said that during the quarter some businesses -- including its U.S. consumer property and casualty insurance business and some financing business in Argentina, the UK and Italy -- were classified as discontinued operations. Excluding those businesses, its loss from continuing operations was $671 million, it said.[5] During the quarter various business lines including three international automotive financing operations were removed from the company's continuing operations. Excluding these businesses, net loss from continuing operations totaled $671 million in the third quarter of 2009, compared to $2.5bn a year before.[8] The global automotive finance business reported third quarter 2009 pre-tax income from continuing operations of $395m, compared to a pre-tax loss from continuing operations of $379m a year before.[8]
For the quarter, GMAC reported a pre-tax loss from continuing operations of $963 million, representing a sizable improvement from last year's pre-tax loss of $2.2 billion, KDP said. Overall, "trends are reasonably favorable, as the company is making progress toward shrinking its balance sheet and focusing on its core businesses," the KDP report said.[6]
Deposits rose by $2.3 billion during the quarter, GMAC said. Its insurance segment — whose results exclude the discontinued property and casualty insurance businesses — earned $81 million during the quarter, up from $73 million last year.[3] GMAC said it lost $767 million for the quarter that ended in September. That was less than the $2.5 billion it lost one year earlier.[4]
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.[7]
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.[9] NEW YORK (Reuters) - GMAC Financial Services, a lender that has received $12.5 billion in government bailouts, posted a third straight quarterly loss on Wednesday, hurt by red ink in its mortgage business.[5] NEW YORK, Nov 4 (Reuters) - Credit research firm KDP Advisor maintained its buy call for bonds of GMAC Financial Services after the lender posted a third straight quarterly loss on Wednesday.[6]
GMAC Financial Services has reported a third quarter net loss of $767m in 2009, compared with a net loss of $2.5bn in the third quarter of 2008.[10]
DOW JONES NEWSWIRES GMAC Financial Services' third-quarter loss narrowed substantially as the lender posted soaring revenue and much lower provisions for loan losses.[7]
GMAC, the traditional lender to GM dealers and customers, converted to a bank holding company in December to become eligible for bailout money the U.S. Treasury was pumping into banks. The company, which is taking over the auto loan business of Chrysler, has been reported in talks with the Treasury for a third infusion of government funds as GMAC approaches a deadline to implement a plan to enhance its capital.[5] The company's earnings report comes a week after the Treasury Department said it was in talks with the New York-based lender over a third round of taxpayer aid. Neither GMAC nor a Treasury spokeswoman offered any updates on those talks on Wednesday. The government mandated earlier this year that GMAC raise an additional $11.5 billion in capital by early November after undergoing a "stress test" along with 18 other banks.[3]
GMAC has already received $12.5 billion in loans from the U.S. government, which owns a 35 percent stake in the company.[1]
Government "stress test" results issued in May showed GMAC needed to raise $11.5 billion of new capital.[5]
Results in the quarter were adversely affected by losses related to legacy assets in the mortgage operations. During the third quarter of this year, certain business lines were classified as discontinued operations, such as GMAC's U.S. consumer property/casualty insurance business and three international automotive financing operations. Excluding these. To continue reading this article please subscribe or take a free trial to Reactions.[10] Excluding several discontinued business lines and other other items, the company said it lost $77 million. GMAC said its mortgage-lending unit continued to struggle.[1] The unit has been hit hard by the downturn in the housing market and lost $747 million during the quarter. A large portion of the unit's loss was due to a $515 million expense to increase repurchase reserves, the company said.[3]
Excluding mortgage-repurchase expenses, tax benefits and mark-to-market gains, among other items, the company's loss from continuing operations was $77 million.[7] Excluding several discontinued business lines, the company earned $77 million.[2]
GMAC posted a loss of $767 million, from a year-earlier loss of $2.52 billion. [7]
The Financial Services Authority (FSA) recently fined one of the mortgage largest lenders that came onto the UK mortgage market in 1998, GMAC-RFC, part of General Motors. The lender was ordered to pay ''7.7 million plus interest to its borrowers and a fine of ''2.8 million for unfair treatment of 46,000 of mortgage borrowers in arrears. According to the investigation carried out by the Financial Services Authority for 4 years (2004-2008), GMAC-RFC mistreated its customers who fell in arrears and practiced repossession too actively.[11] The consumer group also demanded that the FSA reveals the names of 3 other lenders that are currently being investigated by the organisation over similar failings. Let us remind that earlier this year, the Financial Services Authority has already faced criticism from Members of Parliament, who claimed that the body was too leisurely when enforcing its rules.[11]
Auto delinquencies increased to 3.76% in the third quarter from 2.77% a year earlier and 3.48% in the second quarter. [7] Total consumer financing originations during the third quarter of 2009 were $7.7bn.[8]
SOURCES
1. The Associated Press: GMAC Financial Services net loss narrows in 3Q
2. The Associated Press: GMAC Financial Services net loss narrows in 3Q
3. The Associated Press: GMAC Financial Services 3Q loss narrows
4. GMAC cuts losses in third | lansingstatejournal.com | Lansing State Journal
5. GMAC Posts Q3 Loss, Hurt by Mortgage Unit - ABC News
6. Buy GMAC 2012 notes, hold on ResCap - KDP Advisor | Markets | Markets News | Reuters
7. GMAC 3Q Loss Narrows On Higher Revenue, Lower Loss Provision
8. US: GMAC reduces Q3 loss: Automotive News & Comment
9. GMAC Loss Slims on Revenue Jump - WSJ.com
10. GMAC Financial Services posts 767m loss | 04112009 | Reactions - Global Insurance
11. Mortgage Lender Fined ''10.5 Million by the FSA | E1 BTL FINANCE News
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