Last November, Glendale Federal Bank Chief Executive Stephen J. Trafton boarded up his posh, wood-paneled office atop a Glendale high-rise and relocated to a decidedly unglamorous branch building a few blocks away.
The move was more symbolic than substantive. Having narrowly averted federal seizure a year earlier with a $451-million recapitalization, Trafton sought a clean break with Glendale Federal's troubled past.
Now, with the thrift's capital levels replenished and fresh off a major legal victory stemming from the government's handling of the savings and loan crisis, Trafton is reinventing Glenfed as a community bank.
Concluding that the thrift industry is as good as dead, he has taken aim at the state's biggest banks. Discarding the genteel airs long associated with financial institutions--punctuated by ads featuring smiling faces and scenic vistas--Glenfed has instead opted for attack ads.
Its "You Deserve Better" billboards show a red circle with a line through "B of A," and plug Glenfed's toll-free phone number, 1-800-41-FED-UP. A TV commercial suggests bringing a deck of cards or a copy of "War and Peace" to pass the time in bank lines.
It's an approach unprecedented in the industry. But Trafton, who has adopted the persona of a warrior fighting for the hearts and wallets of passbook customers, considers Bank of America, Wells Fargo Bank and First Interstate Bank the enemy.
"The reason that they're the target is because they are large, they are arrogant, they are mass-market-oriented rather than individual-customer-oriented, and they also have the largest population of annoyed customers in the United States."
And, Trafton added, "they have everything that we want."
But analysts say such posturing actually reflects a cold reality for savings and loans that survived the industry crisis: Change or die.
Indeed, despite its recovery, Glenfed's survival is still not assured. In its fiscal year ended June 30, Glenfed earned $75.1 million, its first annual profit since 1990. It has pared its portfolio of problem assets to a respectable level and sold its branch system outside California. But for an institution of its size--$16 billion in assets--Glenfed's profits are still modest compared to those at major banks.
"It's a fact that unless S&Ls; diversify, it's the end of their existence," said Barry Rubens, president of California Research Corp., a Santa Monica bank consulting firm.
It's not surprising, then, that Glenfed is not alone in trying to become more bank-like. Other large savings and loans, such as Great Western Financial Corp., are acting more like banks by encouraging customers to use checking accounts.
That's because the thrift crisis underscored the riskiness of their basic business of making home loans, and the mortgage business is increasingly moving toward specialized lenders such as Countrywide Credit Industries. Most industry insiders predict an eventual consolidation of bank and thrift charters.
But for now, Glenfed stands alone by virtue of its sheer pugnaciousness.
"I'd say Glendale is going about this more aggressively and at a higher speed than any other thrift in California," said James M. Marks, an analyst at Hancock Institutional Equity Services in San Francisco.
During a Bank of America special offer on certificates of deposit, for instance, Glenfed branches opened early. Employees were sent with signs and loudspeakers to Bank of America branches, where they offered coffee to customers waiting in line.
Knowing that he can't beat the big banks on pricing, Trafton is hoping to win on service. Tellers have no time limits per customer, and there's no extra charge for using a teller. Canceled checks are sent with monthly statements for no additional fee.
Glenfed is also using its 148-branch network to court individuals and small businesses with offerings more typical of commercial banks, such as credit lines, debit cards, payroll and tax services, and--after the first of the year--brokerage services.
Thrifts have also been notoriously bad at selling new products and services to existing customers. Trafton hopes to cure that, in part by sending customers a single monthly statement for all their accounts.
This gives Glenfed a low-cost means to pitch special deals on unsecured loans or money market accounts.
So far, Trafton said, the new marketing thrust is making headway. In its last fiscal year, Glenfed's deposits increased $2.4 billion--$1.4 billion of that through its branch system and the rest through acquisitions.
The average age of a Glenfed customer has fallen to 38 from 58. These younger customers are expected to be more receptive to a wide array of financial services and products.
Bank of America shrugs off Glenfed's marketing strategy, saying it hasn't made a dent.
"The business is very competitive and has been very competitive for a long time," BofA spokesman Harvey Radin said. "Our customers clearly indicate to us that they like the stability and the security that a bank like our bank can provide."
But Campbell K. Chaney, an analyst at Rodman & Renshaw Inc. in San Francisco, warned that Glenfed risks "awaking the sleeping giant. BofA could twitch and send shock waves through Glendale" through more aggressive pricing, he said.
In the meantime, Glenfed has won another major battle against an even bigger opponent--the U.S. government. Last month a federal appeals court ruled in a $1.5-billion case brought by Glenfed that the government broke promises it made to thrifts during the S&L; crisis.
In 1981, Glenfed agreed to absorb a Florida thrift with a negative net worth of $734 million, and in exchange federal regulators allowed Glenfed to balance the deficit with an equal amount of intangible "goodwill."
But in the landmark S&L; bailout legislation of 1989, Congress ordered Glenfed and other thrifts that struck similar deals to write off the goodwill by January, 1995. The reversal wiped out millions of dollars of Glenfed's capital with a single pen stroke.
The government is expected to appeal to the Supreme Court, but observers predict an eventual settlement that would greatly bolster Glenfed's capital.
That, combined with its improved profit picture and valuable branch network, would make Glenfed a desirable takeover target in this age of consolidation, analysts say. Trafton admits that's a possibility and one that would benefit shareholders, but he wouldn't say if he's talking with any suitors.
But consultant Rubens sees Glenfed as the acquirer.
"I see them being a survivor," he said. "Management has been very aggressive, very successful in coming through this crisis. They're on an uptick, and if they can continue, they've got a good future."
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Glendale Federal Bank recapitalized in 1993, narrowly avoiding government seizure. Since then, Glenfed has continued to improve its financial condition.
1995: $16 billion
1995: $75.1 million
* Bad Loans
1995: $394 million
Note: For fiscal years ended June 30