Magazine article American Banker

Thrifts Pointing the Way as Stock Surge Continues

Magazine article American Banker

Thrifts Pointing the Way as Stock Surge Continues

Article excerpt

Shares of the three largest U.S. thrift companies touched their 52-week highs in trading Monday, buoyed by optimism that the Federal Reserve Board would hold interest rates steady, if not lower them, in the coming months.

Washington Mutual Inc. shares rose 87.5 cents, or 1.9%, to close at $45.9375. Golden State Bancorp jumped $1.25, or 4.9%, to $26.6875. Golden West Financial Corp. climbed $2.1875, or 4%, to $56.625.

Analysts and traders said thrifts have been attracting investors because their lending mix, skewed toward relatively safe residential mortgages, does not pose the same near-term credit risks as commercial lenders. Also, thrifts have begun to catch up with the rising funding costs in recent months because of more aggressive deposit-gathering tactics.

"Their fundamentals are improving," said Steve Wharton, an analyst at the Boston fund company Loomis Sayles & Co.

Among commercial banks, companies with strong processing or asset management capabilities have been coming on strong, analysts said. Mellon Financial Corp. shares increased $2.5625 Monday, or 5.8%, to $46.75, State Street Corp. shares rose $4.67, or 4%, to $124.18. Bank of New York Co. rose $3.375, or 6%, to $57.

These companies, which focus less on traditional lending and more on fee businesses, are benefiting from the perception that they are buffeted from concerns over problem loans, analysts said. "There is more confidence in their business models," said Henry C. Dickson, an analyst at Lehman Brothers.

In general, financial stocks continued their two-day rise Monday as investors dumped technology shares and snapped up the shares of banks, brokerages, and asset managers that have been beaten down in recent sessions. …

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