Golden State Quarter Tops Street Forecast
Golden State Bancorp September-quarter earnings will beat Wall Street forecasts because of a wider spread between interest income and interest expenses, the thrift’s chief executive said Monday.
“You will see further gradual improvement in earnings and earnings better than the Street expects--not wildly better, but better,” said Chairman and Chief Executive Stephen Trafton in an interview.
Trafton would not specify how much the thrift earned in the quarter. Golden State will report results for the quarter ended Sept. 30, its fiscal first quarter, next Tuesday.
The Glendale-based thrift, formerly known as Glendale Federal Bank, was expected to earn 37 cents a share in the quarter, the average of six analysts surveyed by IBES International Inc. In the year-ago quarter, Golden State had profits from operations of 27 cents a share.
On Monday, Golden State shares rose 25 cents to close at $32.88 on the New York Stock Exchange.
Trafton said Golden State’s larger-than-expected profit mainly reflects lower interest rates paid for deposits and other sources of funds. The spread between interest income and the cost of funds will be a little more than 2.75 percentage points compared to 2.68 in the previous quarter, Trafton said. This difference between interest rates paid and interest rates charged is the basic source of profit for banks.
Golden State’s spread is widening partly because of its success in attracting new checking-account customers. Checking accounts represented a little more than 14% of total deposits in the quarter, compared with 12.8% in the June quarter.
Checking accounts pay no or low-interest rates and are an inexpensive source of funds.
The thrift, which has about $16 billion in assets, also saw its portfolio of problem assets shrink in the September quarter, Trafton said. Problem loans and foreclosed real estate represented 1.26% of total assets in the June quarter. Trafton said Golden State is on track to trim nonperforming assets to less than 1% of total assets by the end of the December quarter.
