In an effort to buff up its merger proposal for Great Western Financial Corp., H.F. Ahmanson & Co. on Tuesday posted first-quarter earnings a week ahead of schedule-and the news was good.
The Irwindale, Calif.-based thrift, locked in a takeover battle with Washington Mutual Inc. of Seattle, said it earned $103.1 million in the quarter, up 59% from the year-earlier period and 13% from the preceding quarter. The figures exclude a one-time gain from the sale of four Arizona branches.
The performance exceeded the analyst consensus by 4 cents a share, or about 5%. The news apparently pushed Ahmanson's shares up. The stock was showing a brisk gain of $1.625 a share in late trading Tuesday. Great Western climbed $1.75, and Wamu gained $1.44 in a strong day for bank stocks.
The accelerated reporting schedule is "part of the beauty contest," said Gareth Plank, an analyst with UBS Securities, San Francisco. "It's a battle of degrees and every degree helps. Good earnings, timely reporting, these are all issues that make their offer more credible. They're showing in the details that they can perform, and that gives them an advantage."
Washington Mutual, which has a friendly merger agreement with Chatsworth, Calif.-based Great Western, intends to release its earnings with Great Western's on April 15. Ahmanson had been telling analysts it would release its earnings on that date as well.
But analysts said getting the numbers out early makes sense because Ahmanson is running short on time in completing its consent solicitation. The strong numbers could gain it some votes and speed the process.
"Obviously, they felt they put together a tremendous quarter and that it needed to be in the marketplace in a timely manner," said Todd Pitsinger, an analyst with Friedman, Billings, Ramsey & Co., Arlington, Va. "I can't blame them."
Ahmanson's consent solicitation asks shareholders to force Great Western to hold its annual meeting-at which Ahmanson will put up three directors for election-on April 22, or within two weeks of that date.
If that measure were approved by Great Western shareholders, Ahmanson still would need to clear several regulatory hurdles to prepare for the annual meeting, including mailing out proxies at least 10 business days before the meeting. That amount of lead time is no longer possible if the meeting were to be held on April 22.
"Relatively soon, there would be a time crunch, no question," acknowledged a member of Ahmanson's camp.
Ahmanson has postponed the closure of the solicitation at least twice- because, observers speculated, it has not yet received votes from the required majority of holders of the outstanding shares.
One of the main contributors to Ahmanson's strong quarter was improving credit quality, analysts said. Credit costs sank to $46.3 million in the quarter, down 35% from the year-earlier quarter and 19% from the previous quarter.
Ahmanson also originated $136 million in consumer loans in the quarter, up from just $17 million the year-earlier period, further evidence of chairman Charles Rinehart's push to make the company more banklike, analysts said.
The company also continued its aggressive share repurchases in the quarter, buying back 2.2 million shares for $75.1 million. That program contributed to a stellar 15.6% return on equity, excluding one-time items.