Michigan National Corp., under pressure from stockholders to improve its performance, has put its large mortgage banking unit on the auction block.
The company has retained Cohane Rafferty Securities, Harrison, N.Y., to advise it on selling Independence One Mortgage, which services $9 billion in loans across the country. Market sources said the unit could fetch well over $100 million.
Douglas E. Ebert, Michigan National's chief operating officer, confirmed rumors about the sale effort. He said it was part of a strategy to refocus the banking company on its home state.
The sale effort comes amid mounting speculation that the bank, with $10 billion of assets, will either be restructured or sold in its entirety. The company said last month that it had hired Keefe, Bruyette & Woods Inc. to advise it on "various financial matters."
Michigan National, based in Farmington Hills, Mich., returned just 0.23% on its assets last year, the worst performance among all U.S. banking companies with assets of $10 billion or more. As a result, shareholders have been demanding action.
In moving to shed Independence One, Michigan National is bucking a trend. Many commercial banks have been buying mortgage banks in attempts to boost fee income and forge closer ties with consumers. Among the buyers: Bank of America, Boatmen's Bancshares, and Chemical Banking Corp.
Mr. Ebert said the key issue was that Independence One needed additional investment to build production capability, but that the funds might be better spent on strengthening the bank's core Michigan business.
Independence One, one of the fastest-growing mortgage operations in the late 1980s, was hit hard during the refinancing boom. As homeowners paid off loans that Independence had expected to service for years, the company took some $100 million in writedowns.
Slipped from $14 Billion
The prepayments, coupled with some sales of servicing rights, reduced the servicing portfolio from about $14 billion just a year ago.
Some analysts said they would welcome a move by the company away from the mortgage field.
"One of the complaints about them was that they were turning themselves into a thrift," James M. Schutz a vice president at Chicago Corp said. "This should put a lot of people's minds at ease that they want to be a bank."
Mr. Schutz added that a sale would improve Michigan National's expense ratios, which have been pulled down by the mortgage unit, as well as adding to the company's capital, although he and others said that was not as pressing an issue.
Offices in 10 States
Independence One, based in Southfield, Mich., produces loans through its offices in 10 states nationwide. It has both retail and wholesale functions.
The company held meetings with staff members last Thursday and Friday to announce its intention to be sold, sources said.
Mr. Ebert pointed out that many of the banks buying mortgage banking companies have had a national scope.
The question for Michigan National, he said, was whether a national business like mortgage banking mixes well with a regional banking business.