WFS Financial : No. 2 on Return on Equity 100

WFS Financial is a child of the successful marriage of a conventional savings and loan and an automobile loan specialty operation 13 years ago. The parent company, Westcorp, is able to play in the big leagues of auto financing with companies 10 times its size.

Last year, the Irvine parent company streamlined its main unit, Western Financial Savings Bank, and put all auto financing operations into the S&L;’s subsidiary, WFS Financial. It then sold 17.6% of WFS to the public last August.

WFS, which pioneered the sale of securities backed by car loans, has since shown how important it is to Westcorp’s financial health. Its net income rose 66% for the quarter ended March 31 to $9.3 million, or 40 cents a share, from $5.6 million, or 30 cents a share, during the first quarter of 1995.

WFS’ high return on equity--net income as a percentage of shareholders’ initial investment--is partly a result of the structure of the company, but it is nonetheless an impressive sign.

Taking advantage of a fragmented market, the company has become the fourth-largest auto lender in the country by offering services through auto dealers and keeping borrowers to strict criteria for credit.

WFS, in a rapid nationwide expansion, opened 25 offices in nine new states and ended the year with 89 offices in 16 states.

Since 1985, WFS has backed $6.2 billion in automobile contracts with securities. Packaging large numbers of loans this way has played a role in making financing easily available to consumers, because the securities spread risk among many loans and allow lenders--in effect, the buyers of the securities--to buy or sell the package of loans as conditions merit.