THE thrift industry's worst problems appear to be receding.
"In spite of the continuing national economic recession and persisting real estate depression, a smaller, but healthy and profitable thrift industry was emerging as the 1991 year ended," notes an analyst at Ferguson & Co., a financial data publishing company.
While more weak thrifts are expected to fall by the wayside, Con Rusling, president of Sheshunoff Information Services, maintains that "the number of insolvent thrifts has declined from a high of 606 at year-end 1989 to 100 at the end of the third quarter ."
Data released by the Office of Thrift Supervision suggests that the disposition of failed and failing thrifts may be nearly two-thirds complete, reports Veribanc, a banking research firm.
Veribanc also said that both S&Ls and banks saw declines in foreclosed property holdings during the third quarter, the first such drops in more than two years.
Last week California's largest thrifts announced hefty gains for the fourth quarter of 1991, which produced a good year overall. What's important is that two of the California companies are the two largest thrifts in the United States - H. F. Ahmanson & Co., in Los Angeles, and Great Western Financial Corporation, in Beverly Hills.
"The thrift industry has turned the corner," insists Lawrence Vitale, an analyst with Kemper Securities Group Inc. As the economy improves, argues Mr. Vitale, the construction industry will gain, in turn boosting financial companies. Investors, he says, should consider taking a financial position in carefully selected thrifts.
"We see healthy earnings for the better large publicly traded thrifts during 1992," says Paul Huberman, an analyst for Standard & Poor's Corporation. The good earnings results, Mr. Huberman says, will stem mainly from "healthy spreads for the first quarter" between earnings on outstanding loans and interest paid out to depositors; "lower provisions" for loan losses; and "better loan growth over 1991."
That is not to say there will be no more collapses. A number of S&Ls at the bottom of the government's four-tiered classification system for thrifts will likely fail this year or next, says Huberman. But the good news is that most of these thrifts have already been identified, and regulators are seeking a takeover or merger of some type.
Nor is the cost to taxpayers over. Some 678 thrifts have already been taken over, socking taxpayers with $78 billion in direct costs up to now. Congress has voted another $25 billion in bailout funds.
And last week Albert Casey, who was appointed in October to head up the Resolution Trust Corporation (RTC) - the Washington agency cleaning up the assets of failed thrifts - reiterated the agency's request for another $55 billion to finish up the bailout program. Congress, for its part, appears to be in no mood to fork up the additional cash until the current $25 billion is spent.
Are there good thrifts left in which to invest? Analysts are quick to answer in the affirmative. As of last June, the RTC had identified roughly 500 thrifts as Group III or Group IV savings associations - i.e., thrifts operating in the private sector but with significant problems. But they represented less than one-fourth of the industry's 2,200 thrifts and about 35 percent of assets.
While Vitale of Kemper likes many stronger thrifts in the Western US, including California and the Pacific Northwest, he says the Midwest is the region of greatest thrift profitability. Midwestern thrifts also score high in capitalization.
Huberman, of Standard & Poor's, says that the thrift industry will continue to "maintain a distinct identity" as mortgage lenders. He expects that about two-thirds of the private-sector thrifts not managed by the RTC will survive. He advises investors to exercise caution, "buying only companies with the strongest capital position and subject to the stock selling at a good price."