State’s Remaining Big Thrifts Vulnerable to Takeover
Here come the out-of-towners.
H.F. Ahmanson’s surprise takeover bid for Great Western Financial is expected to accelerate the consolidation of California’s remaining thrifts as major out-of-state lenders move into the market in a significant way, analysts said Tuesday.
“This leaves most of the large Southern California thrifts vulnerable,” said Claire Fleming, a thrift analyst with Friedman, Billings, Ramsey in Arlington, Va. “For large institutions that want to get into that market, acquiring a large thrift is the only way to gain size.”
This strategy would make sense for banking giants such as Norwest in Minneapolis and Banc One of Columbus, Ohio, both of which have signaled interest in Southern California. It would also be a good move for Washington Mutual Savings Bank, the Seattle thrift that recently purchased American Savings in Irvine and is eyeing several other purchases in the Southland, analysts said.
“Anybody and everybody could be next,” said longtime banking analyst Campbell K. Chaney in Walnut Creek, Calif. “It’s a consolidation of the strongest buying the weakest and the strongest buying as much as they can.”
Stocks of some of the largest Southern California thrifts jumped to new highs Tuesday as investors bet on future takeover activity. Some of the next likely acquisition candidates include:
* Glendale Federal Bank. It’s no secret that Glenfed, with more than $15 billion in assets and a strong branch network of 122 offices and decreasing nonperforming loans, is the next likely candidate. Its buyer could be Banc One or another commercial bank, analysts said.
Still, no action is expected until after this summer, when the thrift expects to receive a long-awaited lawsuit settlement from the federal government, analysts said. Until then, Glenfed is expected to continue using aggressive advertising to take customers away from major banks.
“I don’t think they are worried about these dinosaurs roaming the Earth--they see it as an opportunity to pick off customers,” said analyst Gary Gorden with PaineWebber in New York. “They are probably writing new ads right now.”
* Coast Savings Financial. This Los Angeles thrift is also a strong takeover target and is reportedly in negotiations with Washington Mutual, though there are some accounting conflicts, analysts said. With its emphasis on residential real estate lending and retail banking through 90 offices, several analysts predicted this thrift will be next.
* FirstFed. With only 25 branches and five loan offices concentrated mostly on the Westside of Los Angles, it might be just the right “in-fill” acquisition for San Francisco-based First Nationwide, which just completed its purchase of CalFed in Los Angeles, analysts said.
* Downey Savings & Loan. Although mid-sized, with about $5 billion in assets, this Newport Beach thrift is known for its strong branch network in Southern California and steadily improving balance sheet. Former Wells Fargo executive James W. Lokey, a key player in the merger with Wells Fargo and First Interstate, this month became Downey’s new chief executive, a signal to some analysts that Downey may be considering its own merger.
Some analysts speculated that Downey could be packaged with a Glenfed and sold to an East Coast bank. But it would probably be a stock deal, because a large part of the thrift is still owned by the founder, who might be looking for stock rather than cash for tax purposes.
* Golden West Financial. The Oakland-based firm operates 118 branches in California and six other states under the name World Savings Bank. The third-largest U.S. thrift company has seen its earnings increase through more home loans, but declining credit quality and lingering effects from the recession continue to hurt profit. A large commercial East Coast bank would be a likely buyer for Golden West, analysts said.
If the Ahmanson takeover of Great Western is successful, it will be the third major acquisition involving a large California thrift in less than a year. Washington Mutual paid $2.05 billion for American Savings and First Nationwide shelled out $1.2 billion for CalFed.
Continuing deregulation of the financial services arena has spawned upheaval in the industry and increased competition between banks and thrifts for market share.
Charted originally by the federal government to encourage consumer savings and make mortgages, thrifts now offer checking accounts, credit cards, personal loans, stocks and mutual funds and variable-rate mortgages. California thrifts control 39% of the state’s deposits--the largest percentage of any state in the nation, according to SNL Securities, a data firm in Charlottesville, Va.
As both thrifts and banks continue to cut costs, expand into new markets and increase value for shareholders, consolidation trends are only expected to continue, analysts said.
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The Big Leap
Shares of California’s biggest thrift institutions jumped to record highs Tuesday as investors bet on a new wave of takeovers in the wake of H.F. Ahmanson’s surprise bid for Great Western. Publicly traded California thrifts companies, ranked by assets:
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52-week Tues. close Assets Company high/low and change (billions) H.F. Ahmanson $45.25/$22.25 $44.88, +$4.38 $50.0 Great Western 45.13/21.13 44.88, +10.63 42.9 Glendale Federal 27.75/15.50 27.50, +1.88 15.6 Golden West 76.00/49.00 74.25, +2.25 12.8 Coast Savings 46.00/27.63 45.75, +2.13 8.7 Downey Savings 23.38/13.38 23.38, +1.88 5.2 First Federal 26.25/13.75 26.13, +2.00 4.1 Westcorp 23.88/15.75 17.75, +0.75 3.3 Bank Plus 13.25/8.63 13.25, +1.13 3.3 Bay View Capital 58.00/30.25 55.94, +0.19 3.3 CenFed Financial 33.75/20.75 33.75, +1.88 2.2
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Note: All stocks trade on NYSE, except Bank Plus, Bay View and CenFed, which trade on Nasdaq.
Source: Times research; SNL Securities
The Companies at a Glance
H.F. Ahmanson
* Chairman: Charles R. Rinehart
* Headquarters: Irwindale
* Locations: 391 retail banking offices in four states and 118 loan offices in nine states**
* Employees: 9,502 (1996)
* Assets: (as of Dec. 31, in billions) $50.0
* Loans: (as of Dec. 31, in billions)
Real estate: $46.1
Consumer: $0.70
Business: $0.05
Great Western
* Chairman: James F. Montgomery
* Headquarters: Chatsworth
* Locations: 296 retail branches in California and 120 in Florida, 502 consumer finance offices in 23 states and 220 mortgage loan offices in 27 states
* Employees: 13,191 (1996)
* Assets: (as of Dec. 31, in billions) $42.9
* Loans: (as of Dec. 31, in billions)
Real estate: $28.8
Consumer: $2.36
Business: $0.01
** In California and Arizona, bank offices are called Home Savins of America; in Texas and Florida they are Savings of America.
Researched by ROB CIODE / Los Angeles Times
Sources: Great Western Financial, H.F. Ahmanson
