Thursday, GMAC Financial Services (GJM) slipped to a loss in the fourth quarter from a profit last year, primarily due to losses related to legacy assets in its mortgage operations. Results for the year ago period benefited from an $11.4 billion after-tax gain from the extinguishment of debt related to GMAC's bond exchange.
GMAC slipped to a fourth quarter loss of $4.95 million from a profit of $7.46 million in the year-ago period.
During the year, GMAC decided to sell certain businesses and has classified them as discontinued operations. Excluding results from these businesses, net loss from continuing operations totaled $3.9 billion, compared to net income from continuing operations of $7.7 billion in the year-earlier quarter.
The quarter results were adversely affected by a $3.3 billion mortgage loss, a $573 million mortgage repurchase reserve expense and a $308 million amortization expense related to last year's bond exchange. Results were also negatively impacted by a $262 million provision related to legacy Nuvell subprime assets, a $122 million adjustment of valuation of mortgage servicing rights, and a $118 million in wind-down cost loss. The aggregate pre-tax impact of these significant items was $4.7 billion.
Segment-wise, Global Automotive Services posted a pre-tax income of $309 million from a pre-tax loss of $346 million in the prior-year period due to strong re-marketing gains, offset by losses in international operations, wind-down costs and a loss provision expense related to Nuvell subprime legacy portfolio. The size of the Nuvell portfolio was $4 billion at the end of this year and is expected to run off to approximately $2 billion before the end of next year.
North American Automotive Finance segment turned to a pre-tax profit of $369 million from a pre-tax loss of $405 million, driven by stronger net financing revenue on improved remarketing gains, offset by loss provisions related to the Nuvell subprime legacy portfolio.
International Automotive Finance segment pre-tax loss widened to $146 million from a pre-tax loss of $74 million in the year-ago period due to losses related to certain wind-down costs.
GMAC's insurance business pre-tax income decreased to $86 million from $133 million in the prior year period due to lower earned premiums on extended service contracts and lower dealer inventory levels. GMAC continues to streamline its insurance segment to focus primarily on dealer-centric products, such as extended service contracts and dealer inventory insurance.
Mortgage Operations pre-tax loss widened to $4.0 billion from $790 million in prior-year quarter due to sale of legacy mortgage assets, resulting in a $2.6 billion loss.
GMAC posted a loss from corporate and other operations of $767 million, compared to an income of $8.8 billion, due to amortization expense related to last year's bond exchange, and losses in its Commercial Finance business. Last year's results were largely driven by a $10.7 billion pre-tax gain from the extinguishment of debt related to the bond exchange.
Total net revenue for the quarter declined drastically to $1.505 billion from $10.86 billion in the prior-year period. Revenue from other sources declined to $902 million from $11.28 billion, while revenue from net financing increased to $603 million from a negative $426 million in the year-ago period
For the full year, GMAC reported a net loss of $10.3 billion, compared to net income of $1.9 billion on a sharp revenue decline to $6.3 billion from $15.5 billion last year. Net loss from continuing operations totaled $8.0 billion, compared to net income of $3.4 billion in the prior year.
Looking ahead, the company said that its efforts to strengthen its capital base are expected to improve GMAC's access to the capital markets over time and minimize further effects from the legacy mortgage business. The company is also looking at exploring strategic alternatives for ResCap and the mortgage business and faster repayment of the U.S. government's investment.
GJM is currently trading at $19.64, down $0.30 or 1.50%, on the NSYE.
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