BankAmerica Corp. said Monday that it has agreed to sell its consumer finance unit for $1.6 billion, the largest deal yet in the lucrative but risky subprime lending business.

The buyer-Commercial Credit Co., a unit of Travelers Group Inc.-said it is paying a $300 million premium over net tangible assets for Security Pacific Funding Corp., which makes home equity and personal loans to consumer with blemished credit records.

The planned sale, slated to close in the third quarter, is the latest in a string of high-profile deals for subprime lenders. The price fetched by Security Pacific Funding breaks the record $1.1 billion that Household International Inc. agreed to pay May 21 for Transamerica Corp.'s finance unit.

Monday's announcement coincided with BankAmerica's move into investment banking through the planned acquisition of Robertson Stephens & Co. (See related story on this page.) The deals, combined with BankAmerica's planned retreat from Hawaii, were taken as signs that the company is deemphasizing some retail businesses.

The sale would rid San Francisco-based BankAmerica of a unit that analysts say has underperformed since it was acquired in 1992 through the purchase of Security Pacific Corp. The finance company had been on the block since March.

Commercial Credit would gain a network of nearly 300 branches, mainly in the western U.S., and a $1.2 billion loan portfolio dominated by home equity and personal loans. The company currently makes home equity, personal and credit card loans through an 850-branch network.

Commercial Credit's top executive said deal-making in the subprime sector, already brisk, is about to explode.

"A number of larger players have continued to do well in the last few years, and the scale is starting to pay off," said Robert Willumstad, chief executive officer. Indeed, it is the third time in six years that Commercial Credit has bought a subprime unit from a bank.

The hefty premium-about 33% of receivables-that Commercial Credit is paying for Security Pacific Funding is in line with recent consumer finance unit pricing. H&R Block recently a premium of more than 25% for Fleet Financial Group's subprime unit, Option One.

Some observers said BankAmerica had integrating Security Pacific Funding into its culture. Soon after BankAmerica acquired it, the unit lost several top executives, disrupting the profit stream.

A former top executive of the finance company, speaking on condition of anonymity, said BankAmerica put bankers into top positions, contributing to the unit's decline.

Consumer finance units require higher maintenance and need more discipline, while their daring lending exploits give banks pause.

"Certain banks just shouldn't be in this business," said Michael Durante, an analyst with Prudential Securities. Management needs to be focused on the business, he said and BankAmerica "just ignored" Security Pacific.

In recent years, Fleet Financial Group Inc., and Bank of Boston have pulled of the high yield, high worry subprime lending sector by selling finance units. But others, such as KeyCorp, have declared their intention to expand their subprime businesses.

"The jury is still out on whether or not banks can do it," added Mr. Willumstad.

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