Richard M. Greenwood is trying to revolutionize the way ailing Fidelity Federal Bank of Glendale, Calif., does business.

Since he took over the $3.7 billion-asset company in June 1992 he's been crafting a strategy where a sales force can do everything from originate mortgages to sell mutual funds, with backup from employees who process the paperwork.

Fidelity has to radically change. It's cleaning up millions in problem loans and trying to recover from a jolting $113.6 million loss in the first nine months of the year.

There are encouraging signs. The company raised $110 million in capital last August, and bad loans are shrinking. But one question he faces is whether a handful of investors, who own about 50% of the company, will push to sell it.

Mr. Greenwood and Robert P. Condon, president and chief executive of Fidelity's registered broker-dealer, spoke to the American Banker on a recent trip to Washington.

Q.: Can Fidelity survive as a traditional thrift?

GREENWOOD: No, we can't survive running a traditional thrift. Can we survive providing retail financial services to our customers? Yes. The foundation is being totally focused on what the customer needs, not the products that we want the customer to buy. We simply aren't letting ourselves lock into the traditional patterns.

Q.: How is that philosophy playing out at Fidelity?

GREENWOOD: If we can't generate an asset that returns the right return on equity, the long-term answer is, don't originate that asset. Short term it may be painful ... but we don't want to have that obligation of putting on assets that don't make the right return for us.

Q.: And you've made some painful decisions?

GREENWOOD: We decided to shut down our mortgage operation. That was a major decision, when [Federal Reserve Chairman Alan] Greenspan started playing with interest rates to control inflation and the bond market took off and fixed-rate mortgage rates went with it. We didn't feel it was an appropriate thing to do to take this new capital we just raised and do negative spread business.

Q.: Isn't this sales strategy old hat?

CONDON: This is not a new idea ... but to see it uniformly done as a fully integrated platform is a differentiation, and there is nobody else in our market doing it.

Q.: What's so different about your strategy?

CONDON: Most of the banks and thrifts that are in that business are running their securities and insurance operations as completely separate businesses. We believe quite the opposite. We believe we have the point of sale mechanism, which is the relationship with the customer.

Instead of starting with the focus that I have annuities to sell, therefore that's what I am going to sell you when you walk in the door, we start with the focus of saying, what is it you need?

Many banks and a lot of the largest thrifts think that they solve that problem by helping the customer identify the need and then having specialists that you can direct the customer to. It is very inefficient.

Customers don't like to be moved around from body to body. They may not speak about it, but typically they are offended when they get moved around.

Q.: Do you see this strategy evolving into anything else that will differentiate you from the competition?

GREENWOOD: The final step in this evolution, and I'm ready to do it right now, is ... our customer comes in and our CD rates aren't high enough but they want FDIC-insured deposits. I'd like to be able to sell customers somebody else's FDIC-insured product.

Q.: Are your investors satisfied with your overall strategy?

GREENWOOD: I think the investors are satisfied that we are approaching the business the right way.

Q.: Well, how long before they push for a sale of the company?

GREENWOOD: Our commitment to them while we are making this a better company is not to resist overtures. This is not an issue of a management team trying to ... live on to our retirement.

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