First Union Corp. rolled into the transportation business in a big way Thursday, announcing that it will plunk down $900 million in cash to buy a railcar leasing business from a unit of Ford Motor Co.

The deal for USL Capital Corp.'s freight car-leasing business - slated to close in the third quarter - would vault First Union into second place in North America, behind GE Capital Corp.

With the move, First Union Rail Corp. - the Charlotte, N.C., banking company's two-year-old rail leasing unit - would nearly triple its fleet to 44,000 railcars.

The deal underscores banks' eagerness to diversify beyond retail banking into higher-margin businesses. Annual earnings growth in banking is expected to be in the 10% to 12% range, versus 15% to 20% in rail leasing, according to Sandra Flannigan, a bank analyst with Merrill Lynch & Co.

"Rail leasing is a low-capital, high-return business, and First Union is a company that is seeking ways to build its nontraditional bank income in businesses that offer returns that are well above traditional banking returns," Ms. Flannigan said.

At first blush, rail leasing and banking seem like an odd mix. Indeed, most banks that have eyed nonbank acquisitions - First Union included - have concentrated on fields like asset management and asset-backed finance.

But Anthony Davis, a bank analyst with Dean Witter Reynolds Inc., said the purchase fits nicely with First Union's specialized lending and capital markets capabilities. For instance, he said, First Union could offer leases to railroad companies themselves, or to manufacturers that use railcars to distribute their products.

"It adds one more marketing tool to our quiver," said Jack Thomas, president of First Union Rail. "It allows us to be a full-service financial services institution and provide one-stop shopping for our customers."

The USL deal is First Union's second in rail leasing this year. In February the banking company announced it would buy Northbrook Rail Corp., which has 3,000 railcars.

At that time, Mr. Thomas said he did not anticipate a major expansion for First Union Rail. But he said Thursday that USL's decision to break the leasing unit into pieces presented a unique opportunity.

First Union said the USL acquisition would add to earnings immediately, but no figures were provided.

However, Dean Witter's Mr. Davis said the acquisition would double quarterly income at First Union Rail to $4 million by the end of 1997. The bank expects the unit's annual income to reach $50 million by 2000, he added. That would be a tiny slice of the banking company's income, which totaled $1.4 billion in 1995.

First Union's stock fell 50 cents to $64.125 on news of the deal, while shares of Ford Motor Co., USL's parent, were up 12.5 cents to $37.

Ford, which has been trying to sell USL since last fall, decided to break USL into pieces when bidding for the entire unit failed to produce offers that met expectations, investment bankers said.

Investment banking sources said BankAmerica Corp. is still in the hunt for some of USL's remaining businesses. NationsBank Corp., which had participated in an early round of bidding, is said to have lost interest.

First Union said the purchase price for the railcar leasing unit could end up slightly higher or lower than $900 million, depending on the status of some of USL's leases. USL owns 29,000 railcars and roughly $760 million in assets. It has 300 clients nationwide.

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