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NEW YORK — When company leadership highlighted its
first-quarter performance earlier this week, Ally Financial discussed its
objectives for continuing to work with Chrysler franchised dealers even though
its exclusive agreement with the automaker expired on Tuesday.

Ally Financial president Bill Muir acknowledged one of the
biggest changes will be that the company no longer will arrange subvented
leases for Chrysler vehicles. All of that business will be done by Chrysler
Capital, the new private-label, full-service lending program orchestrated by
Santander Consumer USA and Chrysler.

"Our understanding is all of the advertised APR programs are
going to run through Chrysler Capital so that there will be no traditional
subvented business going to anyone else in the future," Muir said during Ally's
conference call with investment analysts.

Ally reported that its Chrysler subvented originations
steadily declined since the second quarter of last year when the company posted
a recent-high of $0.7 billion. The figure declined to $0.2 billion during the first
quarter.

"We would say the pure subvented business from Chrysler
should go to zero pretty quick," Muir said.

Nevertheless, Ally is still planning on keeping some kind of
Chrysler paper on its books because of the strategy the automaker is likely to
implement.

"I think what Chrysler will do instead is they're going to
provide significant cash alternatives, which is going to allow us to kind of
compete for the business in the standard market and be very effective in
continuing to help our Chrysler dealer customers to finance vehicles," Muir
said.

"In addition to that, there's also going to be an
opportunity for us to continue to support the leasing of Chrysler vehicles with
cash that's going to be provided into the marketplace for lease cash in
essence," he continued.

"The advertised subvented programs are going to go away, but
our ability to continue  to participate
in both the retail and lease segments with our Chrysler dealers is going to
continue for us," Muir went on to say.

Overall Q1 Auto Finance Performance

For the first quarter, Ally reported its auto finance division
generated pre-tax income of $343 million, compared to $241 million in the
corresponding prior-year period.

The company highlighted this growth was primarily driven by
strong net financing revenue, which improved $143 million year-over-year,
resulting from strong growth in consumer financing originations and more
favorable margins as more assets are originated through Ally Bank. The
performance was partially offset by a larger loan loss provision as the
portfolio continues to shift to a more diversified mix.

Executives indicated U.S. consumer financing originations in
the first quarter of 2013 were $9.7 billion, on par with the corresponding
prior year period, and were comprised of $4.6 billion of new retail, $2.5
billion of used and $2.7 billion of leases.

Ally explained U.S. consumer financing origination levels in
the first quarter of 2013 were driven primarily by strong, year-over-year
origination growth in the lease channel. In total, used, lease and diversified
new retail originations grew to account for nearly 60 percent of total U.S consumer
originations during the first quarter of 2013.

Furthermore, the company mentioned its U.S. earning assets
for its auto finance segment – which are on-balance sheet assets comprised
primarily of consumer receivables, the consumer held-for-sale portfolio, leases
and commercial receivables – totaled $102 billion, up 13 percent compared to the
prior-year quarter.

U.S. consumer earning assets totaled $70 billion, up 17
percent year-over-year, as strong originations continued to outpace asset
run-off. U.S. commercial earning assets grew slightly to $32 billion at March
31, compared to $31 billion at the end of the comparable prior year period. The
year-over-year increase was driven by higher dealer stocks, according to Ally.

Delinquencies and Charge-offs

Ally also highlighted how its 30-day delinquency rate and
net charge-off rate improved sequentially.

Looking first at delinquencies, the company showed the rate
slid to 1.53 percent in the first quarter, down from 2.00 percent in the
previous quarter. A year earlier the rate stood at 1.68 percent.

For net charge-offs, Ally indicated the rate dipped 0.69
percent in the first quarter, down from 0.76 percent. However the Q1 rate
ticked up slightly from a year earlier as Ally noted it was 0.57 percent in the
first quarter of last year.

"We would expect delinquencies and charge-offs to increase
somewhat on a seasonal basis as we go through the year," Ally chief financial
officer James Mackey said.

"Our portfolio mix continues to normalize," Mackey
continued. "Remember we were coming off a period a couple of years ago where we
had the quality of the portfolio was just unsustainably high. If you look at
our historical metrics, you're going to see it start to trend that way.

"I think because of our underwriting changes we'll top at a level
below that, but it's going to be something above where we are today, which is
what our models would project. So far we're tracking exactly the way we've underwriting
the product to perform," he went on to say.

Possible Ally IPO?

Analysts asked Ally leadership again about its plan to repay
the U.S. Treasury.

Last month, the company's board of directors declared a
quarterly dividend payment on Ally's Fixed Rate Cumulative Mandatorily
Convertible Preferred Stock, Series F-2, of approximately $134 million, or
$1.125 per share, and is payable to the U.S. Department of the Treasury on May
15. 

Including the aforementioned dividend payments on the Series
F-2 Preferred Stock, Ally said it will have paid a total of approximately $6
billion to the U.S. Treasury since February 2009. This amount includes
preferred stock dividends, interest payments and proceeds received by the U.S.
Treasury in its sale of Ally trust preferred securities.

"We're very focused on what's the exit strategy for the U.S.
Treasury," Ally chief executive officer Michael Carpenter said. "That's very important
to us. We're going to do what we have to do to do that. If I had to put money
on it right now, I would say the IPO is the best alternative."

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Nick Zulovich can be reached at nzulovich@subprimenews.com. Continue the conversation with SubPrime Auto Finance News on LinkedIn and Twitter.