Salomon's mortgage arm goes up for sale

Salomon Brothers, the US investment bank, has put its troubled British residential lending business, The Mortgage Corporation, up for sale, writes John Eisenhammer.

The bank is to contact a shortlist of several lenders that have expressed an interest over the past 18 months in acquiring TMC as part of building their own loan books.

TMC has a mortgage portfolio of about pounds 1.3bn and just over 25,500 outstanding loans. Its sale would be part of a pattern of consolidation in the tough mortgage market. Since the beginning of 1994, five of the largest centralised "independent" mortgage lenders like TMC have been bought by mainstream banks and building societies as foreign owners have pulled clear of the market.

The planned disposal would end the difficult excursion into mortgage lending by the US bank. TMC was set up in the late 1980s at the height of the lending boom. In common with many other centralised lenders, it rapidly gained clients with its innovative marketing of mortgage products. But its tactics were exposed as highly risky by the housing market's collapse.

Last year, TMC was threatened with the loss of its credit licence by the Office of Fair Trading because of its aggressive dealing with borrowers.

Potential bidders are likely to include Abbey National and large building societies such as Nationwide, Bradford & Bingley and Britannia. Birmingham Midshires is also believed still to be keen to build up its mortgage book following the acquisition last October of the home lending business of Bayerische Hypo-Bank of Germany.

TMC has made profits of between pounds 16m and pounds 20m in the past three years.