National City Corp. of Cleveland would like to acquire a mortgage business that caters to people with damaged credit histories, said chief executive officer David A. Daberko.

"We certainly are considering growth both internally and through acquisition," Mr. Daberko said in an interview.

The company already lends to people with blemished credit. Mr. Daberko said he would like to expand that business to diversify the company's revenue mix.

National City's subprime lender, Altegra Credit Co. of Pittsburgh, has $1.5 billion in outstanding loans, 95% of which are first mortgages. Altegra originated $1 billion in loans last year, and Mr. Daberko said the company predicts it will double that figure this year.

That's largely because of the shakeout in an industry where a handful of companies filed for bankruptcy protection or sold themselves because of liquidity problems. It is "a direct reflection of the collapse of a lot of the competitors," Mr. Daberko said.

Twenty-five publicly traded companies focus on subprime mortgage and home equity loans, according to SNL Securities. They are among 86 public companies that specialize in subprime lending in general.

"Clearly the market prices have come way down," said Michael McMahon, an analyst with Sandler O'Neill & Partners in San Francisco.

He said the companies trade at "ridiculously low multiples, as several crashed and burned."

Timothy Butler, an analyst with Stifel, Nicolaus & Co. in St. Louis, said, "There has been a tremendous amount of carnage in the subprime sector."

Mr. Daberko said he is not interested in buying a company that has problems. Rather, he said he would prefer one whose stock has been hurt because of its competitors' problems.

"Some of the valid people in this business have seen their stock come down 80% or 90%. As cycles go, this would seem to me to be a good time to look at that business," Mr. Daberko said.

Other banking companies have taken advantage of trouble in the sector. U.S. Bancorp of Minneapolis, for instance, bought an 18.75% stake in New Century Financial Corp. of Irvine, Calif., late last year.

Mr. McMahon said there are several lenders that could fit the bill for National City-companies that appear to be performing well but have severely undervalued stock. Among them, Mr. McMahon lists BNC Mortgage Inc. of Irvine, Calif.; Delta Financial Corp. of Woodbury, N.Y.; Long Beach Financial Corp. of Long Beach, Calif.; and Resource Bancshares Mortgage Group of Columbia, S.C., which also caters to borrowers with good credit.

Marty Cohen, vice president of finance for Delta Financial, said his company is not seeking buyers. The other companies did not return phone calls.

Joel Houck, an analyst with A.G. Edwards & Sons Inc. of St. Louis, said most subprime companies are small-few have market values above $1 billion. The exceptions are industry giants Household International and Associates First Capital Corp., each of which hase market capitalization rivaling National City's.

"Clearly the sector does offer high returns," Mr. Houck said. "The challenge for banks is buying something that gives them scale. Outside Household and Associates, no one has a national platform for operations and originations."

National City has a large national mortgage business overall, originating $20 billion in mortgages total in 1998. Two-thirds of the loans are originated outside National City bank markets, which is why Mr. Daberko believes he can build a national business in subprime.

National City's skills in credit underwriting would keep it from facing the problems other subprime lenders have encountered, Mr. Daberko said.

"There were a lot of entrants" to the subprime lending business in recent years, Mr. Daberko said, "and that's where the problems are for the most part."

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