LaSalle Bank Corp. is seeking a buyer for its $224-billion mortgage business, a
struggling operation that has lost marketshare as the bank proved slow to adjust
to changes in the home lending landscape.
ABN Amro Bank N.V., the Dutch
parent of Chicago-based holding company LaSalle, has hired Lehman Bros. Inc. to
handle the sale, which could include the entire division or just the portion
that makes home loans through mortgage brokers, according to people familiar
with the matter. That division accounts for three-quarters of LaSalle's mortgage
business.
The Michigan-based mortgage operation — a top-five home lender
nationally as recently as 2002 — has since slipped to the 18th-largest mortgage
lender, but still services $224 billion in home loans. The entire business could
sell for more than $2 billion.With the move, LaSalle
joins a growing roster of banks and financial institutions questioning their
commitment to the shrinking mortgage business as housing markets swoon. Many
experts anticipate a consolidation wave as mortgage giants add scale to
compensate for constricting profit margins.
A LaSalle spokesman declined to comment.
Possible acquirers could include big mortgage servicers like Wells Fargo & Co.,
Citigroup Inc. and Countrywide Financial Corp. European banks seeking an entry
point into the U.S. home loan market or even some investment banks might also be
interested in LaSalle's mortgage unit, observers say. Representatives for Wells
Fargo, Citigroup and Countrywide declined to comment.
The European banks "all have boatloads of capital and the returns here are
better," says Ed Groshans, an analyst with New York investment bank Fox-Pitt
Kelton.
If LaSalle exits the home loan industry, it will remove one of three major
profit centers for CEO Norman Bobins, who has set a goal of making LaSalle,
Chicago's second-largest bank, a Midwestern powerhouse. Primarily known as a
middle-market business lender, LaSalle also relies on revenues from retail
banking.
But for more than a year, Mr. Bobins has been barred from buying other banks due
to regulatory restrictions stemming from problems discovered in ABN Amro's
smaller New York operation.
If the mortgage business is sold, LaSalle will become smaller and the sale
proceeds will go to a parent that has shown little recent interest in investing
in the U.S.
ABN Amro Mortgage Group has been a major contributor of
revenue to LaSalle in the recent past. In 2002, at the peak of the mortgage
refinancing boom, it accounted for 25% of bank revenue. In that year, ABN Amro
was the fifth-largest originator of mortgages in the country and the
sixth-largest servicer of home loans. (About four of every five mortgages ABN
Amro makes are through outside mortgage brokers; LaSalle customers account for
the rest.)
Through the first nine months of this year, mortgage banking revenue was $297
million — just 8% of LaSalle's total, though that's up 5% from the same point
last year. Today, ABN Amro is the country's 18th-largest originator of home
loans but the eighth-biggest servicer, according to Inside Mortgage Finance,
a trade publication.
The reason for the slide: LaSalle, traditionally a fixed-rate lender, was slow
to offer mortgages allowing borrowers to adjust their monthly payments or pay
only interest for a time, popular features as the housing boom petered out (Crain's,
Sept. 19, 2005). By the time LaSalle changed course and started offering those
products, demand for home loans already had begun to dry up.
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