NEW YORK -

When company leadership highlighted its first-quarter performance last 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."

Nick Zulovich can be reached at nzulovich@autoremarketing.com. Continue the conversation with Auto Remarketing on both LinkedIn and Twitter.