GMAC loss widens on soured loans
Auto and mortgage lender GMAC LLC's loss grew by 15 percent, reflecting an increase in soured loans as the economy weakens.
The net loss increased to $675 million from $589 million a year earlier, as the Detroit-based company set aside 78 percent more for loan losses than a year earlier.
The effects of a soft economy and weaker credit performance on legacy assets continued to put pressure on GMAC's financial performance, Chief Executive Alvaro de Molina said in a statement on Tuesday.
GMAC is one of the 19 lenders undergoing government stress tests to gauge their ability to weather a deep recession. Results are due Thursday, and some analysts believe officials will direct GMAC to find more capital within six months.
In December, GMAC became a bank holding company and got a $6 billion government bailout. As part of a debt restructuring that month, General Motors Corp
Profit from auto finance fell 13 percent to $225 million. Mortgage operations including the Residential Capital LLC unit lost $125 million, the 10th straight quarterly loss, though that amount declined from $859 million a year earlier. Mortgage lending increased 57 percent from the fourth quarter.
Results also reflected an $825 million net loss tied to a bond exchange and the elimination of some debt. Insurance profit fell 62 percent to $50 million.
Net revenue fell 9 percent to $2.2 billion, and GMAC set aside $843 million for credit losses, up from $474 million.
The company may face increasing pressure as its former parent GM shrinks and perhaps tumbles into bankruptcy, following rival Chrysler. GMAC is the main provider of financing to buyers of GM vehicles.
Last week, GMAC agreed to provide financing for Chrysler customers and dealers after that automaker filed for bankruptcy protection. Cerberus led a buyout of Chrysler in 2007.
Also in April, GMAC said it would resume making car and truck loans to subprime borrowers to help spur sales at GM, and that ResCap was hiring 1,000 people to handle a surge in refinancings and jumbo loans.
GMAC has nevertheless said there remains substantial doubt about ResCap's ability to survive, citing deteriorating credit and mortgage markets, liquidity and capital.
(Reporting by Jonathan Stempel; Editing by Derek Caney)
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