The outcome of the battle over Great Western Financial Corp. could determine the overall pace of mergers in California this year, experts say.

If hostile bidder H.F. Ahmanson & Co. prevails, Seattle-based Washington Mutual Inc. would be on the prowl for alternative deals-perhaps picking up where it left off this year in talks with Coast Savings Financial, Los Angeles.

"Merger activity will be high-order" if Washington Mutual loses Great Western, said analyst Charlotte Chamberlain of Jefferies & Co., Los Angeles, because the Seattle powerhouse would look for other ways to bulk up in California.

But if it wins, Washington Mutual is expected to sit out the merger dance for a few quarters to digest its California purchases.

Under that scenario, Irwindale, Calif.-based Ahmanson-limping from the loss-may emerge as a juicy acquisition target but at a discounted price that it would be under pressure to accept, some said.

As the last sizable franchise, other than the Japanese banks, Ahmanson would be "vulnerable" to out-of-state bidders, an analyst said.

If Ahmanson chairman Charles Rinehart "doesn't get Great Western, he'd have to start growing more aggressively-internally or externally-or else he would become a target," agreed Campbell K. Chaney, a San Francisco analyst for Sandler O'Neill & Partners.

Among likely bidders, Mr. Chaney said, would be the $80 billion-asset thrift that would be formed through a merger of Washington Mutual and Great Western.

The striking absence of out-of-state banks from the contest for Great Western-Washington Mutual already has a significant presence in the state- underlined another puzzle in the California consolidation scene. Will out- of-state banks play in the California sweepstakes or not?

Many experts and thrift investors continued to maintain that big banks with ambitions of being truly nationwide institutions have no choice but to enter California, which has 12% of the nation's 260 million people.

Moreover, to open a beachhead against retail giants Bank of America and Wells Fargo, the out-of-staters would have to deal with thrifts-the only targets with enough deposits to have some market clout, these experts said.

But the banks most often mentioned as potential acquirers, such as NationsBank Corp. and Norwest Corp., have steadily disavowed any interest in the California thrifts.

NationsBank spokeswoman Lynn Drury said last week: "Historically, NationsBank has not been interested in savings and loans as acquisition targets. They're one-product companies, and we don't get the leverage we get out of commercial banks."

Lawrence R. Vitale of Bear, Stearns & Co., New York, put it more bluntly. He asserted that for a major banking company to buy a California thrift would be suicidal.

"You've got the 900-pound gorilla on the one hand. You've got arguably the smartest, nimblest retail bank on the other hand," Mr. Vitale said, referring to Bank of America and Wells Fargo, respectively.

"And you're going to pay a premium for the privilege of competing with those two companies, and you're going to do it armed with a thrift? I think most bankers would say that strategy is suicide."

California is key to a national strategy, Mr. Vitale agreed, but at "thee times book for thrift, I think most of them (commercial banks) would rather wait" for alternative ways to enter.

Joel W. Silverstein, an analyst at Deutsche Morgan Grenfell, agreed it makes sense for banks to concentrate on figuring out alternative strategies to reach their existing retail customers-and use those vehicles, such as Internet banks, to do business in California.

"Longer-term you can't avoid California," Mr. Silverstein said. "But there's no sense of urgency for someone to have to get in there right now."

There is one group of investors, however, that is increasingly bullish on California. That's foreign banks, who seek the consumer banking business of the state's sizable and growing ethnic minorities, as well as to finance California's trade with Asia.

Taiwan's Bank Sinopac is waiting for approval from the Federal Reserve to clinch an $85 million deal for Far East National Bank, Los Angeles. Meanwhile another Taiwanese bank, First Commercial Bank, is slated to open a new state-chartered bankin May in the southern California town of Alhambra.

Analyst Steve Didion of Hoefer & Arnett, said he believes foreign banks will buy other commercial banks that serve specific ethnic populations. The niche strategy gives these foreign banks a California presence without requiring them to go head-to-head with Bank of America or Wells, Mr. Didion said.

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