First Bank System Inc., Minneapolis, is the latest banking company to announce a retreat from mortgage banking. The company said Thursday it was seeking a buyer for most of the business of its two mortgage banking company, which operates as FBS Mortgage, St. Paul, and Colorado National Mortgage, Denver.
Industry sources said such a deal could fetch more than $150 million.
Recently, First Interstate Bank of California, Los Angeles, announced that it had formed a joint venture with PHH Corp., Hunt Valley, Md., to take over the task of telemarketing mortgages to its customers. Earlier this year, Wells Fargo farmed out its mortgage business to Norwest Mortgage Inc., Des Moines.
"We are committed to having mortgage products available for our customers," said John F. Grundhofer, chairman, president, and chief executive officer of FBS. "So we will offer mortgage loans through personal bankers, private banking mortgage specialists, and our relocation and telemarketing channels instead of the mortgage banking company."
Mr. Grundhofer said FBS would continue to emphasize its Home Advantage loan, which is geared to low- and moderate-income homebuyers.
"We are selling most of the mortgage banking company because it is detracting from shareholder value," Mr. Grundhofer said. "The business is faced with irrational pricing due to the continued imbalance between supply and demand and a set of competitors that is willing to buy market share."
He continued: "In addition, the mortgage business requires significant investment in technology in order to remain competitive. We have determined that we will direct our investments toward strengthening businesses where we already have established competitive advantages and critical mass."
First Bank System calls itself a leader in the payment systems business and a top provider of corporate trust services.
FBS's mortgage companies originated $1.5 billion in mortgage loans in 1994 and service $15 billion loans.
The company said that it hoped to have the sale completed by the end of the year.