NEW YORK (Reuters) - Ally Financial Inc (N:ALLY) will overcome General Motors Co's (N:GM) decision to stop using the lender for discounted leases on new cars by expanding business with dealers for other automakers, a spokeswoman said late Monday.
General Motors told Buick and GMC dealers on Jan. 9 that it planned to replace Ally with its in-house financing arm, GM Financial, for subsidized leases on its automobiles beginning in February. The news was previously reported by Automotive News.
"GM Financial's expansion in leasing is consistent with their parent's stated objective to grow," Ally spokeswoman Gina Proia said in an email. "As [GM Financial] has grown, Ally has continued to thrive and broaden its business, while still supporting the GM dealer network."
Over the past two years, Ally lost exclusive agreements to offer loans on new GM and Chrysler cars that the automakers subsidized. It responded by working to increase its market share among other brands, and in the third quarter the bank increased its new car lending on non-GM and non-Chrysler vehicles by 54 percent from the same period in 2013.
Nevertheless, leases for new General Motors vehicles accounted for nearly one-quarter of Ally's automotive finance business in the third quarter.
"This is a negative development for Ally," Jefferies analyst John Hecht said in a research report, though he added that he was not changing his earnings estimates for the company since he thought the bank could offset the loss through other carmakers.
Proia declined to comment on why Ally did not disclose the loss of GM's subsidized leasing business to investors.