(Adds details on the performance of Ally's auto lending business)
By Peter Rudegeair
NEW YORK, Jan 29 (Reuters) - Ally Financial Inc, the largest U.S. auto lender, reported on Thursday a substantial rise in fourth-quarter profit thanks to a decrease in litigation-related expenses.
Net income for common shareholders of the former in-house financing arm of General Motors Co 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 extended $9 billion in auto loans in the fourth quarter, 10 percent more than a the same period a year ago but 24 percent less than the third quarter. Ally attributed the decline from the prior quarter to seasonal variations as well as a decrease in loans for GM vehicles that were subsidized by the carmaker.
Despite the increase in lending, revenues from Ally's auto finance business fell 5 percent to $767 million because of lower gains from leasing.
The outlook for Ally's leasing business, a segment that management has been focused on growing, became cloudy in early January when GM said it would stop using the lender for discounted leases on new cars. Leases for new GM vehicles accounted for nearly one-quarter of Ally's auto finance business in the third quarter.
Ally said on Thursday that it expects GM's decision to have a minimal impact in 2015.
Earnings in the fourth quarter of 2013 were weighed down because of a $98 million charge related to settlement the bank reached that December with the U.S. Department of Justice and Consumer Financial Protection Bureau over discriminatory loan pricing. (Reporting by Peter Rudegeair in New York; Editing by Chizu Nomiyama)