LaSalle Bank, a Chicago unit of Holland's ABN Amro Bank NV, is on the prowl to expand its asset-based lending unit, LaSalle Business Credit Inc.

The bank, with $36 billion of U.S. assets, hopes to become one of the top three asset-based lenders in the country through a buy-and-build strategy during the next five years.

The planned move is earnings-driven, said Michael Sharkey, president of LaSalle Business Credit. Asset-based loans generate returns to shareholders that are 20% to 30% better than returns from standard commercial loans, he said.

LaSalle, which has 12 asset-based-lending offices scattered across the nation, is experiencing 15% to 20% annual growth in its asset-backed portfolio, which totals $2.5 billion, bank executives said. But it will face a formidable task challenging the likes of Bank of America Corp., Fleet Financial Group, and GE Capital Corp., the asset-based lending leaders.

Each of those companies already has a strong national presence in the $254 billion-a-year asset-based lending market, a fast-growing specialized commercial finance sector in which loans are secured by a company's inventory, equipment, or accounts receivable.

New players such as General Motors Acceptance Corp., which entered the business in 1998, also are driving up the prices of smaller firms that might be buyout targets for LaSalle.

GMAC recently agreed to buy the asset-based lending subsidiary of Bank of New York Co. for $1.8 billion.

What's more, many economists say that the credit cycle is shifting, and that the environment will be less friendly to borrowers and lenders alike. Credit downturns can be particularly rough on asset-based lenders, because their loans are usually made to companies that are highly leveraged.

"You're never really prepared when a crunch comes," said Walter Macur, chairman of the LaSalle unit. "But we're not worried about it. We'll actually do better in a down cycle than in an up cycle, because we get better pricing and returns."

Mr. Macur, a 37-year veteran of asset-based lending, also said LaSalle has unusually effective due diligence and risk management teams. Unlike newer entrants into the business, those teams have been in place for more than a decade.

LaSalle Business Credit was the asset-based lending group at Standard Chartered Bank PLC, which LaSalle Bank bought in 1993.

The group has spurned factoring, the business of making short-term loans on accounts receivable. Such loans are considered more risky, because factors are responsible for nonpayments or credit losses.

"What you're talking about is our niche in the asset-based lending," Mr. Sharkey said. "We already are a big player. For us to make the jump into the top three, it's going to be an effort, but we're going to do it."

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