Spiga

Banks take on more risk??

Last month, Bank of America (nyse: BAC - news - people ) struck a five-year deal to acquire $55 billion of consumer auto loans from General Motors Acceptance Corp. (nyse: GMA - news - people ). In June, it announced a $35 billion deal to buy credit card lender MBNA (nyse: KRB - news - people ). Both moves were seen as a quick way to amass higher-yielding assets.

HSBC Holdings' (nyse: HBC - news - people ) U.S. consumer finance subsidiary just struck a deal to buy smaller credit card lender Metris Cos (nyse: MXT - news - people ) for $1.6 billion. Earlier this year, Seattle-based thrift Washington Mutual (nyse: WM - news - people ) agreed to buy yet another credit card lender, Providian Financial (nyse: PVN - news - people ) for just over $6 billion.

This month Puerto Rican bank Popular (nasdaq : BPOP - news - people ) got a deal to buy the online mortgage and auto lender E*Loan for $300 million.

Top executives at Charlotte-based Wachovia (nyse: WB - news - people ) are yearning to get back into the credit card business. Wachovia sold its operations in 2001, and the bank was believed to have been in the hunt for MBNA this year.

There are a number of banks that are deposit rich but asset poor," says Christopher Wolfe, senior director at Fitch Ratings, which said Thursday the HSBC deal should boost the British bank by giving it more scale in a consolidating industry. What's more, Wolfe says, "specialty players bring a lot of marketing and IT" knowledge.

The competition for loan customers, both consumer and commercial, could result in some credit losses down the road. The Office of the Comptroller of the Currency said last month that it is the first time in 11 years that it has seen a relaxation of underwriting standards for retail loans.

0 comments:

footerads