NEW YORK ( TheStreet) -- Bailed out lender Ally Bank may be a good fit for Wells Fargo (WFC - Get Report), JPMorgan Chase (JPM - Get Report) and CIT Group (CIT - Get Report), 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 - Get Report), 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 analystsThe 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 - Get Report) 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.
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.
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