Magazine article American Banker

Big Golden State Thrifts with Low Stock Prices Called Ripe for Plucking

Magazine article American Banker

Big Golden State Thrifts with Low Stock Prices Called Ripe for Plucking

Article excerpt

What's in store this year for the mortgage business?

That's not a simple question to answer because the mortgage industry isn't a monolith and the various segments of the industry are often affected in opposite ways by developments in the marketplace.

For example, one prominent consultant thinks 1995 will be bad enough for the large California thrifts to make a couple of them disappear - swallowed up by large commercial banks while their stock is good and cheap.

A big reason why they are good and cheap is that rate competition has been fierce, making mortgage originations unprofitable. The losses have been a drain on thrift profits.

The commentator, David M. Partridge of Towers Perrin Consulting, did not name any targets. But then, how many large publicly owned Golden State thrifts can you name?

There's Home Savings, Great Western, Golden West, CalFed, Glendale, and Coast Savings. All would all be plums for a big commercial bank that wants access to West Coast pocketbooks, especially in light of the burgeoning of interstate banking.

Mr. Partridge's thesis is that the price acquirers are willing to pay is being based today more on the value of the customer base for cross-selling than on the existing business. Valuation of such acquisitions is shifting to the value of the customer base for purposes of cross-selling additional products.

The market for purchase mortgages has held up well despite rising interest rates. David Dusenbury, an analyst in New York with CS First Boston, thinks demand for homes will remain fairly sturdy this year, even with a rise of 300 basis points in mortgage rates. …

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