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Automakers offloading loan commitments is good for banks

Banks are muscling in on US auto finance as vehicle makers divert capital to manufacturing and marketing.

Auto finance captives reducing the amount of capital they are prepared to commit to consumer auto loans could present a growing opportunity for banks. Speaking at a Lehman Brothers Financial Services conference in New York in September, CEO of Wachovia Ken Thompson said he thought the fact that companies such as Ford and General Motors were shifting capital away from their financing arms and reducing their loan exposure was positive for the banking industry. Auto loans constitute the second-largest asset class in consumer banking.

Ford and GM are "starved of capital and they're taking capital out of their finance operations and putting that into their manufacturing and marketing operations," Thompson said. "I think that opens the playing field for other financing sources."

His comment came a day after Wachovia agreed to acquire Californian Westcorp and the auto finance group in which Westcorp has a majority stake, WFS Financial, for about $3.9 billion in stock. With this, Wachovia becomes the ninth-largest US auto lender. It might not stop there. Thompson thinks the business could produce double-digit growth and that the bank might make other auto-finance acquisitions. "There could be other opportunities. If the right one came along, that might make sense, but we're not projecting that."

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