GMAC Financial Services, which provides both automotive and home loans, said Tuesday it posted a wider second-quarter loss of $3.9 billion as it transformed from an arm of General Motors into an independent bank.
In the year-ago period, the company posted a loss of $2.48 billion.
Revenue during the quarter fell 28% to $1.27 billion from $1.76 billion.
The bulk of the latest quarterly loss stems from a $1.6 billion charge related to company's mortgage business. GMAC also incurred a $1.2 billion tax charge on its conversion from GM's financing arm to a separate company offering personal banking services in addition to auto loans for GM and Chrysler customers.
Excluding those charges, GMAC said its second-quarter loss was about $400 million.
"GMAC's results in the quarter were dramatically affected by a series of strategic actions that produced a short-term negative impact to financial performance but are expected to lead to longer-term benefits," said GMAC CEO Alvaro de Molina. "This is about gaining funding and operational flexibility, expanding on our strengths, and shedding legacy and non-strategic assets, allowing us to focus on the core automotive and mortgage origination and servicing businesses."
Midway through the quarter, GMAC was named as Chrysler's preferred lender. However, GMAC's automotive unit lost $727 million in the quarter, compared with a loss of $717 in the second quarter of 2008.
In May, the Treasury Department announced a new $7.5 billion injection for GMAC — still short of the $11.5 billion the government's "stress test" last month showed the company needs to stay afloat if the economy worsens. Of the injection, $4 billion was earmarked for new loans to Chrysler dealers and customers. The remaining $3.5 billion was to go toward boosting GMAC's capital base.
To help GMAC raise the remaining capital, the Federal Deposit Insurance took the rare step of allowing the junk-rated company to gain access to its debt guarantee program. GMAC will be allowed to issue as much as $7.4 billion in FDIC-backed debt. The FDIC guarantees the debt that GMAC would issue in case the company defaults on payment.
The Federal Reserve also waived rules to give GMAC's new bank, called Ally Bank, more leeway to make loans to GM customers.
Ally Bank had assets of $42.5 billion at the end of the quarter, up from $36.4 billion at the end of the first quarter, the only comparable quarter. Ally received $25.4 billion in deposits in the quarter, including $14.5 billion in retail deposits as the company heavily marketed its new bank status.