Toyota Gets OK for Banking Operation

Toyota Motor Corp., the world’s second-largest automaker, said on Monday that it had received approval to set up a U.S. banking operation as part of plans to triple the company’s earnings from financial services in two years.

An application from Toyota’s U.S. finance company, submitted in November 2002, was approved in late January by the Federal Deposit Insurance Corp., spokeswoman Kerry Rivera said. Toyota Financial Services Bank was incorporated in Nevada and probably will start operating in six to nine months, she said.

The Torrance-based maker of Corolla small cars and Camry sedans in 2003 overtook Ford Motor Co. in worldwide vehicle sales for the first time, but it earns less than Ford and General Motors Corp., the largest automaker, from household and auto loans. In 2003, financial services were 4.7% of Toyota’s global revenue, compared with 17% for Ford, according to regulatory filings.

The focus of the bank, Toyota Financial Services Bank, will be to provide new types of loans to Toyota and Lexus dealers, Rivera said.

The company has said it wants to offer personal loans and credit cards to buyers of Toyota and Lexus vehicles.

Toyota Financial Services has $43 billion in assets and 2.3 million U.S. customers. As of Sept. 30, Toyota reported cash and equivalents of about $19.2 billion.

Toyota’s import, distribution and marketing arm, Toyota Motor Sales USA, also is based in Torrance.

Toyota has said it planned to raise profit from finance businesses to at least $950 million by 2005. Much of that growth would come from the U.S., said Ken Yamada, who helps manage $9 billion, including Toyota shares, for Kaye Anderson Rudnick Investment Management in Los Angeles.

A U.S. bank “is part of the whole financial services unit’s growth strategy,” Yamada said. “They’re leveraging their triple-A credit rating status and strong balance sheet.”

The main role of Toyota Financial Services in its current form is to provide loans to dealers and indirectly finance consumer vehicle purchases.

With a banking arm, Toyota could match the broader range of financial services offered by General Motors and Ford, including mortgages and credit cards.

Under the banking license Toyota Financial Services received, the company is restricted from issuing commercial checks or establishing interstate branches, Rivera said.

Toyota’s U.S. shares rose $1.35 to $67.75 in New York Stock Exchange trading. They have gained 42% in the last year.