Royal Bank of Canada said it agreed to buy the Canadian auto finance and deposit business of Ally Financial Inc. in a $4.1 billion deal aimed at expanding its auto lending business.
The deal, which needs regulatory approval, is expected to close in the first quarter of 2013. RBC competed with another Canadian bank, Toronto Dominion Bank, in an auction, a source told Reuters on Monday.
Ally, majority-owned by the U.S. Treasury, said in May it planned to sell its international operations in an effort to speed up repayment of government bailouts during the financial crisis.
Ally, the former auto lending arm of General Motors Co., last week agreed to sell its Mexican insurance business to ACE Ltd for $865 million in cash.
Ally's international operations in Europe, Canada, Latin America and Mexico have drawn interest from more than 30 bidders, including banks and GM, the source said. Bidders are interested both in regions as well as individual country businesses, the source said.
Ally Chief Executive Michael Carpenter said in a statement the lender continues to evaluate options for its remaining operations in Europe and Latin America and expects to identify its plans in November.
The lender's Canadian operations, based in Toronto, are its largest outside the United States, with $13.6 billion in assets at the end of the third quarter.
International business assets totaled $31 billion, with $7.6 in book value, according to a company presentation in August.
Ally is trying to turn around its operations by focusing on U.S. auto lending and banking.
Its Residential Capital mortgage unit filed for bankruptcy in May in a bid to protect the parent company from lingering liabilities tied to home loans it sold to investors during the housing boom.
An auction for ResCap's mortgage servicing and lending operations begins on Tuesday in New York. A consortium of Ocwen Financial Corp. and Walter Investment Management Corp. is vying with Nationstar Mortgage Holdings Inc. to buy the business, sources told Reuters last week.
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