By Peter Rudegeair
NEW YORK, Jan 29 (Reuters) - Ally Financial Inc, the largest U.S. auto lender, expects the loss of an exclusive lease agreement with General Motors Co to have a minimal impact on earnings in 2015, executives said Thursday.
Starting in February and March, GM plans to use its in-house lending arm, GM Financial, exclusively for leases of Buick, GMC and Cadillac vehicles, brands that accounted for around 13 percent of the $41 billion of auto loans and leases Ally made in 2014. The change applies only to leases that GM subsidized to help sell cars.
Ally executives got a heads-up about the move a few days before GM notified its dealerships in early January but were caught off-guard that GM Financial decided to keep all of that business for itself.
"We don't see how auto sales are increased by having less, otherwise known as no, options for consumers and dealers," Ally Chief Executive Mike Carpenter told analysts on a conference call.
Ally, which was formerly GM's financing arm before being spun off last decade, has been striving for years to win business from a wider array of carmakers. The share of its lending that came from non- GM or Chrysler dealers grew 45 percent in 2014 compared to 2013. Carpenter estimates that every 1 percent increase in business with these dealers is worth about $2.5 billion new loans.
Among other car brands, Ford Motor Co accounted for 22 percent of Ally's loans in 2014, while Nissan Motor Co Ltd and Maserati each accounted for around 10 percent.
That diversification strategy helped Ally's lending in the fourth quarter grow to $9 billion, 10 percent more than the same period a year ago. In all, Ally's fourth-quarter net income for common shareholders rose to $109 million, or 23 cents per share, from a loss of $344 million, or 78 cents per share, in the fourth quarter of 2013.
Ally could see a bigger impact if GM decides to pull exclusive leasing arrangements with brands, most importantly Chevrolet, that account for a larger chunk of Ally's overall business.
Carpenter told analysts that it had further options if that happened, like "growing assets outside of the auto space more aggressively" and bringing down Ally's cost of funds.
One option he is not considering seriously is buying another bank to get cheap deposits, given the expense of maintaining a brick-and-mortar branch network.
"That's like buying yesterday's fish," Carpenter told Reuters. (Reporting by Peter Rudegeair in New York; Editing by Bernard Orr)