GMAC Financial Services has booked a first quarter 2009 net loss of $675m, compared to a net loss of $589m in Q1 2008 due to continued pressure on its mortgage and auto finance operations as the number of bad loans rose.
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The losses were partially offset by profitable insurance business and $631m in after-tax gains on debt extinguishment transactions, GMAC said.
“The effects of a soft economy and weaker credit performance on legacy assets continued to put pressure on GMAC’s financial performance in the quarter,” said GMAC CEO Alvaro de Molina. “There were also several signs of progress to mention, such as expanding retail auto lending, maintaining our commitment as a leader in wholesale financing, re-entering the prime jumbo mortgage market, and increasing bank deposits by about $3bn from the end of the year.”
GMAC last week said it would now be the preferred provider of auto finance products and services for Chrysler dealers and customers.
“This agreement leverages GMAC’s strengths, diversifies our auto finance business and provides new revenue opportunities for the company,” de Molina added.
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By GlobalDataGMAC’s global automotive finance business booked net income of $225m in the first quarter of 2009, down from $258m a year ago.
New vehicle consumer financing originations during the first quarter significantly decreased to $3.4bn from $13.1bn in 2008. In comparison to Q4 2008, origination levels increased from an extremely low $2.7bn.
Credit losses increased in the first quarter of 2009 to 2.41% of managed retail assets, versus 1.34% in the first quarter of 2008 due to higher frequency of losses in North America and Europe and increased severity in North America.
Delinquencies, that is contracts more than 30 days past due, also increased to 3.08% in the first quarter of 2009, compared to 2.42% in the first quarter of 2008.
GMAC’s insurance business recorded net income of $50m, down from net income of $132m in the first quarter of 2008.
Mortgage operations, which include the ResCap legal entity, the GMAC Bank mortgage operation, and the ResMor Trust Canadian mortgage operation, reported a net loss of $125m for the first quarter of 2009, compared to a net loss of $859m a year ago.
“Looking ahead, the economic environment remains challenged – market-based funding remains scarce, economic conditions are soft and credit quality continues to deteriorate,” the financier said.
GMAC is one of 19 lenders subject to government “stress tests” of their ability to weather a deep recession and results of the tests are due on Thursday, according to a Reuters report.
GMAC has lost money in six of the last seven quarters as the deteriorating auto and housing markets caused financing volume to decline and credit losses to soar.
In December, GMAC got a $6bn government bailout and completed a debt restructuring that enabled it to become a bank holding company.
But it still faces pressure as GM shrinks and perhaps goes into bankruptcy though it should benefit from the Chrysler agreement.
“We have plans to work through 2009 with our current liquidity” without more federal funding, and “don’t feel we are short on cash in any way,” GMAC CFO Robert Hull told Reuters.
“Clearly a GM bankruptcy would not be good for us, but don’t get me wrong, a GM bankruptcy would not trigger a GMAC filing,” he added.
