Magazine article American Banker

A Strong Quarter for Big West Coast Thrifts

Magazine article American Banker

A Strong Quarter for Big West Coast Thrifts

Article excerpt

The larger West Coast thrifts have chalked up one of their strongest quarters in recent memory, analysts say.

Excluding a multitude of one-time charges in the third quarter, most notably for payments to replenish the Savings Association Insurance Fund, the performance of the large thrifts justified analysts' cautious optimism for the industry.

"The positive story we're expecting for 1997 remains in tact," said Thomas O'Donnell, an analyst at Smith Barney Inc. "The California economy is turning, expense controls are in place, buybacks continue - all the fundamentals are there."

The quarter was marked by generally steady credit costs, limited balance sheet growth, and some net interest margin pressure, analysts said. Margin pressure, driven by the rising cost of funds, kept earnings from ratcheting up even more, analysts said.

"When you back out all the noise, you're seeing operating earnings at 20% to 30% up over last year, and I expect similar increases next year," said Bruce Harting, an analyst at Lehman Brothers.

The $50.6 billion-asset H.F. Ahmanson & Co., of Irwindale, Calif., recorded a $79.5 million net loss for the quarter, caused by a $144.4 million charge for the thrift fund assessment and the $8.3 million purchase of 61 branches divested in the First Interstate Bancorp-Wells Fargo & Co. merger.

Without the charges, earnings would have improved 11%.

Analysts were most impressed with the company's continued commitment to buy back shares - 1.9 million in the quarter - and its 5% reduction in nonperforming assets to $897.6 million, or 1.77% of total assets.

"This is really the most positive earnings release I've seen out of Ahmanson in roughly three and a half years," said Charlotte A. Chamberlain, an analyst with Wedbush Morgan Securities. "I would have liked to have seen more loan originations," she said, "but you can't have everything. …

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