Stock prices of major California thrifts have been slowly declining since early December, and analysts do not expect the slide to end anytime soon.

From Dec. 1 through March 5, while the Standard & Poor's index of major bank stocks was rising 9.5%, stocks of the five largest California thrifts fell 3.5% on average.

After enjoying a bull market in 1995, these companies could be headed for a long-term decline as the fundamentals of the thrift industry steadily deteriorate, analysts asserted.

"There is a malaise surrounding the California thrifts," said Campbell Chaney, an analyst in Rodman & Renshaw's San Francisco office. "The dearth of any events surrounding these thrifts has caused some investors to become impatient and sell their positions."

Last year several events boosted these stocks more than 50%, he said.

For example, a federal appeals court ruled that the government owes thrifts perhaps billions of dollars for breaking a 1980s promise to let the companies count goodwill as part of regulatory capital.

Merger activity also led investors to hope the California thrifts, long talked about as takeover candidates, would soon be acquired.

But this January, the Supreme Court agreed to review the goodwill decision, and merger activity has slowed. Furthermore, with Wells Fargo & Co.'s acquisition of First Interstate Bancorp pending, one of California's largest acquirers will disappear.

Also, First Interstate was the only apparent entry vehicle into California for an out-of-state bank. Using a thrift for access to a state the size of California would be virtually unprecedented for a bank, Mr. Chaney said.

"Put yourself in the shoes of a superregional," said Gary Gordon of PaineWebber Inc. "Buying H.F. Ahmanson or Great Western Financial means you are volunteering to challenge two behemoths (BankAmerica and Wells Fargo) with impressive market shares and smart managements from a thrift platform."

With a less dynamic product mix and heavy investment in adjustable-rate mortgages that are less attractive in today's low interest rate environment, thrifts are not the type of acquisition banks consider attractive, Mr. Gordon said.

Many thrifts are trying to reengineer to move into nontraditional businesses. H.F. Ahmanson & Co. and Bay View Capital Corp., a smaller California thrift, are intent on becoming more like finance companies.

And Great Western Financial, like others thrifts, has applied for a bank charter in an effort to become more banklike.

But competition in these fields is already intense, and demand for consumer loans is declining as people reach their debt limits, Mr. Gordon said. As a result, he predicted few gains from these efforts.

Still, not all are pessimistic about the state's thrifts. Sanford C. Bernstein & Co. analyst Jonathan Gray upgraded Great Western Financial last week to "outperform," citing the possibility it could be acquired.

The California economy is improving, which leads analysts like Mr. Gray to contend that credit losses will be very low at the state's thrifts.

A Supreme Court decision on goodwill, expected in June or July, could also turn the tide for California's thrifts. If the high court affirms the appeals court decision, then thrift stock prices could soar, Mr. Chaney said.

But if the appellate decision is overturned, he added, then these stocks have nowhere to go but down.

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