GMAC reports wider second-quarter loss of $3.9 billion

GMAC Financial Services reported on Tuesday a wider second-quarter loss of $3.9 billion as it transformed from an arm of General Motors into an independent bank. The bulk of the latest quarterly loss stems from a $1.6 billion charge related to company`s mortgage business Revenue during the quarter dropped 28% to $1.27 billion from $1.76 billion. In the year-ago period, the company posted a loss of $2.48 billion.

GMAC, which provides both automotive and home loans, 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. Furthermore, GMAC was named as Chrysler's preferred lender. However, GMAC's automotive unit lost $727 million in the quarter, as compared to a loss of $717 in the second quarter of 2008.

Treasury Department announced in May 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. $4 billion of the injection was earmarked for new loans to Chrysler dealers and customers and the remaining $3.5 billion was to go toward boosting GMAC's capital base.

The Federal Deposit Insurance took the rare step to help GMAC raise the remaining capital and allowed 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. Besides, the Federal Reserve 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.