Bank's move puts Westar in driver's seat

CHRIS CLOUGH, THE OLYMPIAN

TUMWATER -- Bank of America Corp. is pulling out of the auto leasing business, and Westar Financial Services is sure to drive off with some of the customers left in a lurch.

The nation's No. 3 bank-holding company also announced Wednesday that it is getting out of the subprime real estate lending businesses, taking a $1.25 billion charge in the third quarter to cover its costs.

The bank said it will abandon the car leasing business immediately, although it said it planned to manage its $9.7 billion portfolio to the end of the term.

"It's the most significant development in the auto leasing industry since the last time they withdrew from the market," Bob Christensen Jr., CEO of Tumwater-based Westar, said Wednesday. Bank of America left the market in the early 1980s only to return four years later.

National

Christensen said Bank of America represents 3 percent to 4 percent of the auto leasing business nationwide.

"They do $4 billion a year in lease originations," Christensen said. "That will now be available to other competitors."

The immediate withdrawal takes effect today, giving auto dealers essentially no notice. The impact on Westar also was immediate, but in a positive sense.

"We are already receiving calls from dozens of dealers wanting to sign on with our program," said Christensen, adding that in one day Westar has generated $100 million in new business relationships.

Westar employs about 100 people and deems itself "the leading publicly traded automobile-oriented e-commerce financial portal."

Westar, formed in 1996, completed the first entirely electronic auto purchase on the Internet and for the fiscal year 2001 racked up more than $300 million in revenue.

Westar's business model is typical of an applications service provider, allowing other companies to tap its information management system.

That system, named LASIRpro, can handle all aspects of lease transactions quickly and in such a way that keeps the information accessible to all departments throughout the company.

Westar makes lease decisions for itself through direct relations with auto dealers in 16 Western states.

Agreements with USAA Federal Savings, Mellon Bank and AmSouth Bancorporation -- three of the nation's 25 largest financial institutions -- give them access to Westar's lease-approval technology.

Westar reported revenue of $146 million in its first fiscal quarter of 2001, which ended June 30. That's an increase of almost 300 percent from revenue of $37 million for the same quarter last year.

Liquidation

But Bank of America has chosen to get out of auto leasing, as well as the subprime real estate lending business. It plans to liquidate its $26.3 billion subprime portfolio during the next seven to nine months.

"Both of these businesses have very volatile earnings streams, have become unattractive from a risk-reward standpoint and have not produced required rates of return," said Kenneth Lewis, chairman and chief executive officer of the Charlotte, NC.-based bank.

Christensen said it's some of the players in the auto-leasing market that are volatile, not the market itself.

"The irrational competitors are withdrawing from a market which they made volatile," he said. "We are looking forward to a market which is rationally priced with competitors that take rational risks."

The Associated Press contributed to this report.

The Olympian Copyright 2001

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