Nineteen ninety-four was a year in which banks were largely absent from the auto loan securitization market, though several thrifts were active and BankAmerica Corp. did a small private placement.

Captive auto company lenders, as usual, dominated the rankings, with Chrysler Corp., Ford Motor Co., and General Motors Corp. providing all the deals worth $1 billion and up.

"These days, it's principally the finance companies, and certainly in dollar amounts, the captives," said John C. Speaks, senior analyst at Moody's Investors Service Inc.

Asset Sales Report, a sister publication of the American Banker, said auto-related volume contributed $17.8 billion of the total $75.2 billion in asset-backed securities issued last year. The largest bank participation came from Union Federal Savings Bank of Indianapolis, which did a $150 million securitization in August.

"It's a very cost effective way to keep growing and move the loans off your books," said Cindy Whitaker, the thrift's vice president in charge of securitization.

Union Federal, like all thrifts, must devote 65% of its assets to residential mortgages in order to retain access to Federal Home Loan Bank funding, which doesn't leave much room on the balance sheet for consumer loans. To build up large auto portfolios - $916 million in the case of Union Federal - S&Ls use securitization, which allows them to earn income from the loans while keeping the credits off their own balance sheets.

Union Federal, which has $1.4 billion of assets, now makes auto loans in 18 states, from California to Virginia. Ms. Whitaker says the company does one securitization each quarter, for a total of $527 million in 1994.

Three other thrifts that did major deals in 1994 were Western Financial Savings Bank, Irvine, Calif.; New South Federal Savings Bank, Irondale, Ala.; and USAA Federal Savings Bank, San Antonio, Tex.

Commercial banks generally stayed away. Anthony Langan, vice president and credit executive of auto finance at Chase Manhattan Corp., New York, attributed this to the interest rate cycle and bank liquidity needs. When rates are low, securitizations provide a less attractive source of funding to issuers, who receive thinner spreads on the sale.

"With rates being very low over the last two years, there's been less of a need for securitization," Mr. Langan said. Chase, which did a $1 billion securitization in 1993, was totally absent from the market last year.

One commercial bank that did take part was BankAmerica Corp., but for a special reason. BankAmerica did a $26 million private placement at yearend to sell off some lower-quality auto paper.

Anne Tonks, senior vice president of BankAmerica's dealer lending division, said the San Francisco-based giant sells so-called C-rated paper each quarter to Greenwich Capital, an investment banking firm that then warehouses it for later securitization. BankAmerica keeps all its "A" and "B" paper on its own books.

"It provides a service to our auto dealers because we can buy a wider spectrum of credit quality," Ms. Tonks said.

The lower-rated, or subprime, paper actually constitutes the fastest- growing category in the auto securitization market. Though risk is much higher, institutional investors can capture yields ranging from 20% to 22%, compared with 5% to 7% for prime paper. Most issuers are finance companies that specialize in subprime auto loans, such as Olympic Financial Ltd., AutoFinance Group Inc., and Americredit Corp.

"The excitement in the industry is in the 'C' and 'D' area, in the low- quality auto paper," said Mr. Speaks of Moody's. "A plain-vanilla Ford or GMAC deal isn't going to excite too many people. But this other stuff is getting a lot of market play.

"It's still relatively small in terms of volume, but it's sizable in the number of deals," he added.

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