Used vehicle originations hit high for Ally

Ally Financial has reported a record number of auto lending applications in the first quarter of the year, when the company recorded net income of $250 million as it starts to shake off a number of legacy issues.

Net income for Q1 2016 was below the $576 million posted for the first quarter of 2015, but that included a one-time gain of $397 million from discontinued operations resulting from the completed sale of the Chinese auto finance joint venture.

The company reported core pre-tax income of $412 million in Q1 2016, increasing from $299 million in the comparable prior year period, which included a $190 million repositioning expense related to the early extinguishment of high-cost legacy debt.

Excluding repositioning items, the company reported core pre-tax income of $419 million in Q1 2016, compared to $490 million in the prior year period, primarily due to a $65 million net gain on the sale of Troubled Debt Restructuring (TDR) mortgage loans a year ago that did not repeat.

Ally said consumer auto originations remained strong at $9 billion for the quarter, down from $9.8 billion in the prior year period and $9.3 billion in the last quarter of 2015. Despite increasing volumes of applications, the risk adjusted yield, which measures expected annual revenue less expected annual credit losses, on retail originations during the quarter improved 52 basis points year-over-year.

Gains in the Growth (non-GM and Chrysler dealers) and Chrysler channels continued to drive consumer auto originations, and excluding GM lease and subvented business, originations increased 10% year-over-year.

Used vehicle originations continue to expand with year-over-year growth in the used channel resulting in $4.1 billion in originations, representing 45% of total quarterly originations, which is the highest in Ally history.

Originations in the quarter also included $4.1 billion of new retail, and $0.8 billion of leases. In addition, volume from Growth dealers increased 23 percent year-over-year, and now account for 37 percent of total originations.

Ally CEO Jeffrey Brown said: “Ally’s auto finance operation continued to post consistently strong profitability. As a result, pre-tax income was up 10% over last year, and risk adjusted returns far outpaced losses.”

“This is a testament to our ability to adapt to an evolving marketplace, including expanding relationships with online auto retailers that specialize in offering used vehicles in an innovative way to a growing base of customers looking for a digital auto experience,” Brown maintained.