What if the Government Had a Thrift Sale and Nobody Was Interested
The Resolution Trust Corp. is going to have a tougher time unloading its inventory of failed thrifts as the financial services industry suffers ever-increasing trauma, industry experts say.
“There are going to be more and more cases where they (RTC officials) throw a party and nobody comes,” one investment banker said.
Last week’s resolution of two big savings and loans reflects the federal clearinghouse’s tougher job. RTC received just three bids for the 24 offices and deposits of Mercury Federal Savings & Loan Assn. In Huntington Beach, which went to Security Pacific Corp. in Los Angeles. And RTC was forced to carve up one of its biggest wards, City Savings Bank in Somerset, N.J., rather than sell it outright.
The agency sold City’s 27 Florida branches to Great Western Bank in Beverly Hills and nine offices in Camden, N.J., to First Fidelity Bank in Burlington, N.J.
But the RTC was forced to retain 66 City branches with $8.2 billion in assets. It got just five bids for any of the possible combinations of the thrift.
In a deal not yet announced, Bank of America is expected to win MeraBank in Phoenix for a relatively skimpy premium of 3% to 4% on deposits.
“Many of the potential buyers (for RTC thrifts) have their own problems,” said Henry Peltz, savings and loan analyst at Keefe, Bruyette & Woods Inc. “With the continuing bad press on the savings and loan industry and uncertainty in the real estate markets, nobody wants to buy these savings and loans.”
Indeed, sources say Chase Manhattan Corp. in New York took a look at City. But with the announcement last week of a projected $625-million loss for the third quarter at the nation’s second-largest bank, Chase is not likely to buy any RTC properties.
“There are many fewer buyers than a year ago,” said John Lyons, president of Lyons, Zomback & Ostrowski, a New York consulting firm. “You can pretty much remove all the New York money-center banks from the roster.”
The three big California banks--BankAmerica Corp., Security Pacific and Wells Fargo and Co.--have been aggressive buyers. But even they may become less enthusiastic.
“You have got to ask yourself, how big is the appetite?” said Terry E. Perucca, Security Pacific’s senior vice president of corporate planning and acquisition. “How many more (RTC thrifts) will Security, Wells and B of A buy?”
B of A has picked up Merabank and Western Savings & Loan Assn., also in Phoenix, and Benjamin Franklin Savings & Loan Assn. in Portland, Ore.
Security Pacific has bought Gibraltar Savings and Mercury. Wells Fargo is buying most of the operations of ailing Great American Bank, although the San Diego thrift has not yet come under the wing of the RTC.
The lack of bidders was also reflected in the premiums for Mercury and City, which were not high. Great Western paid $9.75 million for $938 million of core deposits, according to RTC calculations. Combined with the $9.1 million First Fidelity paid for $468 million in City deposits, the total premium is about 1.5% of core deposits, according to the RTC.
Security Pacific paid $44.4 million for $985 million in core deposits for a premium of about 4.5% of core deposits.
Some analysts and bankers expected Mercury to fetch more because of an attractive branch network and 110,000 customers, mostly in Southern California.
“The prices keep coming down,” said Lyons, the consultant. “Most of the premiums are running under 1%. There are a few exceptions to that on the West Coast.”
Peltz of Keefe said the average premium the RTC received for the 237 thrift resolutions it completed through August was 2.12%.
