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Bank Looks to Sell Stake in Troubled Unit

Finance: Imperial Bancorp wants out of Imperial Credit, may seek buyer for entire company.

December 18, 1998|LIZ PULLIAM | TIMES STAFF WRITER

Los Angeles-based Imperial Bancorp is putting its 24.3% stake in high-risk lender Imperial Credit Industries up for sale, and may seek a buyer interested in purchasing all of Imperial Credit.

Imperial Bancorp, which in recent years has been actively spinning off various specialty-finance units, has been burned by problems at some of those companies.

The bank holding company has been under regulatory pressure this year to reduce its stake in Imperial Credit, an auto and mortgage lender that specializes in lending to high-risk borrowers.

Plans to package and sell the stake to investors were foiled in September by Imperial Credit's plunging stock, a result of turmoil in the "subprime" lending market.

Imperial Bancorp Chairman George L. Graziadio said in a statement that the company would discuss the sale with other Imperial Credit shareholders and may seek a buyer to take the entire company. Graziadio did not return calls seeking further comment.

Earlier this year, regulators demanded that Imperial Bancorp reduce its Imperial Credit holdings, citing banking rules that limit investments in outside enterprises.

Analysts also said Imperial Credit's complex finances and problems proved a distraction for investors trying to understand the parent bank's business.

Imperial Bancorp's chief subsidiary, Imperial Bank, is the largest bank based in Southern California, with more than $6 billion in assets.

"ICII [Imperial Credit] has been a liability for Imperial Bancorp," said Joseph K. Morford, analyst with Van Kasper & Co. in San Francisco. "ICII has made it difficult for investors to get their arms around the bank and its story."

Yet analysts said the latest move is no indication that Imperial Bancorp is backing away from its "incubation" policy of growing, then spinning off specialty pieces, while keeping major stakes.

Imperial Credit was spun off in 1992. The bank has also spun off a residential mortgage real estate investment trust, Impac Mortgage Holdings, and a commercial and condominium mortgage REIT, Impac Commercial Holdings.

Some analysts questioned how successful the spinoff strategy would be in the future.

"It raises questions about what is the core business of the corporation," said Norman Katz of MCS Associates in Irvine. "If you look at Imperial [Bancorp's] earning history, it hasn't been a very successful growth strategy."

Imperial Bancorp reported a net loss of $3.1 million for the three months ended Sept. 30. The company said its earnings have been dragged down in recent months by Imperial Credit's problems. Like other subprime lenders, the company was caught in a credit squeeze this fall when risk-averse investors shut off lines of credit.

Imperial Credit's stock plummeted from a 52-week high of $27.44 in March to a low of $3.88 on Oct. 6. The stock rose 44 cents to $8.19 on Nasdaq on Thursday, after the announcement.

Imperial Bancorp's stock, which peaked at $33.19 in late February, rose 56 cents to $15.69 on Thursday on the New York Stock Exchange.

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