E-Trade unit buys luxury boat, RV finance firm to boost bottom line. (Media & Technology).

The Beverly Hills-based bank subsidiary of Internet financial services company E-Trade Group Inc. plans to acquire Ganis Credit Corp. for $101 million.

The bank would gain Costa Mesa-based Ganis' business of originating and servicing loans on luxury boats and recreational vehicles, an existing $1.7 billion consumer loan portfolio and 260 employees.

The deal, with Ganis parent Deutsche Bank, is set to close by next March.

E-Trade made its name as an online discount brokerage, but has been working to expand into a full-service financial institution. Part of that strategy has been to increase its business in transaction accounts and decrease the number of certificates of deposit it sells, said Richard Repetto, an analyst with Putnam Lovell Securities.

The E-Trade Group has been focusing on its banking business because it accounts for 36 percent of the group's overall revenues, according to Connie Dotson, a spokeswoman for E-Trade Financial. The bank moved into auto loans several months ago. "It's about product diversification," she said.

E-Trade Bank plans to take advantage of cross-selling opportunities that arise from the merger, said Dotson. She anticipates that Ganis borrowers will open new transaction accounts when they begin servicing their existing loans through the E-Trade Web site, which provides several kinds of financial and banking services in one place.

"When the loyalty is built, we sell them additional products," Dotson said.

E-Trade plans to finance the purchase by selling a portion of its held-for-sale mortgage portfolio.

The acquisition of 20-year-old Ganis would further enhance the bank's bottom line because the interest rates on RV and boat loans are higher than on mortgage loans E-Trade Bank currently holds, she added.

The bank has been trying to increase the spread between its lending and borrowing rates by further expanding into the generally pricier consumer finance business.

Acquiring Ganis would boost the yield on the bank's overall loan portfolio by 0.2 percent, according to analysts. Traditional banks typically have a spread of around 3 percent, while E-Trade Bank's spread of 1.52 percent would reach 1.72 percent when the deal closed, according to Repetto.

"Their goal is to get that spread to around 2 percent by the end of

the year, but it doesn't look like that's going to happen," he said.

Dotson acknowledged that the bank probably would not reach its goal of a 2 percent spread by the end of the year. "We're still working toward it, it's still a goal," she added.

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