Magazine article American Banker

BankBoston to Halt Lean-Margin Indirect Auto Lending

Magazine article American Banker

BankBoston to Halt Lean-Margin Indirect Auto Lending

Article excerpt

Another major New England banking company has decided that indirect auto lending is just not lucrative enough.

BankBoston Corp. said it would stop, as of Oct. 31, underwriting the auto loans it makes to consumers through car dealers.

The announcement came just after Fleet Financial Group, also based in Boston, exited the same business by selling its $2.2 billion indirect auto loan portfolio to Sovereign Bancorp, Wyomissing, Pa., for an undisclosed sum.

BankBoston's decision would cut 57 jobs at its Dedham, Mass., service center. Its indirect auto loan portfolio totals $1.5 billion.

The $66 billion-asset BankBoston-the second-largest New England banking company, behind Fleet-said it would continue to lend directly to consumers through its branches and by telephone, and to auto dealers through its commercial lending department.

The decision came after a series of strategic moves by BankBoston to concentrate investments in what it considers its core businesses: retail banking, asset management, and corporate banking in New England and Latin America.

"There has been a change in mind-set at the bank toward concentrating on what they do best," said Salvatore J. DiMartino, an analyst at Advest. The indirect auto loan "business was very small for them," he said, "but it had above-average risks."

Since January, BankBoston has gradually shed its less profitable consumer finance units.

In July, it sold Fidelity Acceptance Corp., a subprime auto lending unit, to Norwest Corp. in Minneapolis for $340 million. In the spring, it sold Ganis Credit Corp., a consumer finance unit specializing in lending for boats and recreational vehicles, to Deutsche Financial Services for $30 million. …

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