Ally Financial Opens Lower in Trading Debut

Shares of Ally Financial Inc.(ALLY) got off to a weak start, edging lower in their trading debut after a tepid initial public offering for the auto lender.

The Detroit company's shares opened at $24.25, down 3% from its IPO offer price, and held declines in morning trading. Ally's 95-million-share IPO, which allowed the U.S. Treasury to slash its stake in the former General Motors financing arm, had fetched $25 a share, the low end of Ally's expected price range.

Ally was a tough sell for some investors because of the low returns its business generates compared with other lenders, and the specter of more  large share sales by the U.S. Treasury Department, which bailed out Ally in the wake of the financial crisis. The IPO reduced the government's stake to 17% from 37%.

The deal raised $2.38 billion for the U.S. Treasury, marking the largest U.S.-listed IPO this year. It came amid a pause for U.S. stocks, which have stalled out around record high levels this year. Investors say stocks are less appealing following last year's 30% rally for the S&P 500, particularly given expectations or a weak corporate earnings season the next few weeks.

As a result of the sale, taxpayers will have more than recouped the $17.2 billion in U.S. government bailout funds that Ally—previously known as GMAC—received through the Troubled Asset Relief Program, according to a Treasury Department statement.

Ally is seeking to grow profits by slashing operating costs, refinancing relatively pricey debt taken on in the wake of the financial crisis, and growing its Ally Bank online banking arm, which brings in deposits the company can use to fund higher-margin lending.

By the end of 2015, the company is aiming to more than double its core return on tangible common equity, a measure of profitability, it said in an online "road show" pitch to investors.

"Near-term, the path to shareholder value creation is simply one of improving return on equity from unacceptably low levels,” Ally Chief Executive Michael Carpenter said in the online presentation.

Ally opened on the New York Stock Exchange under the symbol "ALLY." Citigroup Inc. led the offering with Goldman Sachs Group Inc., Morgan Stanley and Barclays PLC.