Auto dealers drive third-quarter profits higher at Ally Financial

NEW YORK (Reuters) - Ally Financial Inc , the second largest U.S. auto lender, said on Wednesday that its third-quarter profit jumped from a year-earlier loss thanks to higher demand for loans from car dealerships.

Commercial auto loan balances, which includes the financing of dealers' inventories, real estate and other operations, increased around 11 percent to around $31 billion. That pace was nearly double the growth in consumer auto loan balances over the same period.

Ally made $11.8 billion in consumer auto loans in the third quarter, up 23 percent from a year earlier. The increase was driven by a record quarter in used car loans.

Expected lower loan losses also contributed to the lender's bottom line, even as delinquencies ticked up modestly. Ally set aside $109 million for future loan defaults, 38 percent less than a year earlier, even as the share of borrowers who were behind on their payments rose to 2.28 percent from 2.10 percent.

The bank's net income applicable to common shareholders rose to $356 million, or 74 cents per share, from a loss of $109 million, or 27 cents per share, a year earlier. Analysts had forecast that Ally would earn 41 cents a share in the quarter, according to consensus estimates compiled by Thomson Reuters I/B/E/S.

The loss in the third quarter of 2013 was driven by legal expenses tied to Ally's settlements with the U.S. government over legacy mortgage issues.

(Reporting by Peter Rudegeair; Editing by Meredith Mazzilli)