BankAmerica Corp. said Wednesday that it is soliciting bids for its mammoth manufactured-housing division.
BankAmerica Housing Services, the No. 2 prefabricated-home lender in the country, could fetch up to $600 million, analysts said.
The move is in line with BankAmerica's strategy of eliminating noncore businesses, said analyst Kate Blecher of Gruntal Securities. "You can't be all things to all people, even if you're BankAmerica."
Deutsche Financial Corp., the Atlanta-based finance unit of Deutsche Bank, is looking at the BankAmerica unit, manufactured-home lenders said. Deutsche Financial vice president Andy Grigg said he could not comment, but added: "Acquisitions are always interesting to people."
The sale would get BankAmerica out of the business of lending to consumers with tarnished credit records, said chief financial officer Michael O'Neill.
Subprime lending "is not a business that we have any particular strength in or any particular appetite for," Mr. O'Neill said, speaking during the banking company's earnings conference call yesterday. "We as a company feel better about the prime-customer base."
In June, BankAmerica sold off its consumer finance unit, Security Pacific Funding, for an eye-popping $1.6 billion. Observers at the time said the BankAmerica has had difficulties integrating the subprime units it acquired when it bought Security Pacific Corp. in 1992.
Manufactured-home dwellers do not present the bank with many cross- selling opportunities, Mr. O'Neill said. "The unit doesn't quite fit in, despite its good performance."
The bank is quitting the subprime business while other banks are pouring in. Chase Manhattan Corp., KeyCorp, and Barnett are among those that announced subprime or manufactured-home lending initiatives this year.
BankAmerica Housing Services, which originated $3 billion of loans last year, is second only to Green Tree Financial Corp., Minneapolis, in manufactured-housing lending. The BankAmerica unit has a $9 billion portfolio and 45 offices.
Outsiders said the unit's loan quality could hurt the sale price. "They originated a substantial amount of (adjustable rate mortgage) products, which, if rates go up, we feel are not appropriate for manufactured-home buyers," said Jeff Evanson, analyst with Piper Jaffray. These people are generally more sensitive to increases in monthly payments, Mr. Evanson said.
BankAmerica is quitting the manufactured-housing industry when competition has heated up, said Roger Merritt of Fitch Investors Service.
"Definitely margins have come down, and there has been pressure on underwriters to make more loans at more liberal limits," he said.
Deutsche Financial owns ITT, which lends to manufactured-home dealers. A year ago the unit partnered with Oakwood Homes to make manufactured-housing loans.
Analysts who follow the Frankfurt bank were not pleased by Deutsche's interest in the United States subprime market.
"I'm afraid it is possible, but I'm ashamed to think about it," said Peter Thorne, Paribas Capital, London. Deutsche should concentrate on its European retail and investment banking business, he said.
