This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Wells Fargo, CIT a Good Fit for Ally: KBW

Stocks in this article: WFC JPM GM CIT BRK.A

NEW YORK ( TheStreet) -- Bailed out lender Ally Bank may be a good fit for Wells Fargo (WFC), JPMorgan Chase (JPM) and CIT Group (CIT), among a host of potential suitors as an initial public offering of the government-owned bank dims, according to KBW analysts.

Ally, once the auto-finance arm of General Motors (GM), received multiple bailouts during the financial crisis totaling $17 billion, which represents a big chunk of the auto industry bailout. With a $6 billion IPO of Ally Bank less likely, the U.S. Treasury may look for private buyers in a split or sale of the company to unload its current 73.8% stake in the lender, according to KBW.

The company's three units work together with Ally Bank deposits providing funding to an auto lending unit while its insurance arm is an added in-dealership product. However, a government breakup may split the units into separate sales, according to KBW and Feb. 17 Reuters reports of a possible sale instead of an IPO.

Ally Bank could see strategic interest from lenders like CIT Group, who would find the banks roughly $1 billion in deposits to be a strong funding source for their commercial lending businesses, similar to the unit's present role in financing auto sales, according to KBW. Additionally, Ally Bank could draw interest from a traditional bank looking to bolster deposits to fund banking assets like consumer, business and mortgage loans. Overall, Ally Bank may sell at a premium to its deposit size. "We calculate that the maximum value would roughly be a 2% deposit premium, which equates to a purchase price of around $1 billion," write KBW analysts

The auto finance unit of Ally Bank may garner the attention of some of the largest U.S. banks like Wells Fargo, JPMorgan, Capital One (COF), Discover Financial Services (DFS), Huntington Bancshares (HBAN) and US Bank (USB), all with the balance sheets to make a sizeable acquisition, according to KBW. At the end of 2011, the North American auto finance unit had $54 billion in consumer loans and leases and an additional $32 billion in dealer loans, according to its financial statements. KBW analysts also note that the once GM-owned car lending arm still has operates in 74% of the company's dealerships and in 63% of Chrysler dealerships. With both General Motors (GM) and Chrysler reporting strong sales growth, Ally Bank's auto finance assets may warrant a premium-priced takeover, with Wells Fargo potentially seeing the most benefit, according to KBW.

Wells Fargo shares have gained over 13% year-to-date, after sliding over 10% in 2011. Competitors like Bank of America, JPMorgan and Capital One have gained more in 2012 on an easing of the European debt crisis, a resolution to some mortgage litigation issues and M&A.

Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

For more on Wells Fargo and U.S. banks, see the financial stocks bought and sold by hedge funds and 7 bank stocks loved by Deutsche Bank.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs