The biggest surprise for thrifts' fourth-quarter earnings may be that most will meet their targets, despite higher interest rates.

"Most savings and loans should be able to post on-target earnings for the fourth quarter, though it won't be easy," said Thomas O'Donnell, an analyst at Salomon Smith Barney. On the other hand, "there should be few positive surprises this time around, unlike earlier in 1999, when such surprises were plentiful."

Mr. O'Donnell expects good news from $56 billion-asset Golden State Bancorp in San Francisco; $13 billion-asset Peoples Heritage Financial Group in Portland, Maine; $23 billion-asset Charter One Financial in Cleveland, and $3 billion-asset Bank United Financial Corp. in Coral Gables, Fla.

Most of these have become more "bank-like," offering such products as consumer and commercial loans, which are less vulnerable to rising interest rates, Mr. O'Donnell said. Others, such as Golden State have increased non-interest income and implemented tough cost controls

Looking ahead, though, 2000 could bring negative surprises as the environment becomes much more difficult for companies that are highly rate sensitive, analysts say.

"Most thrifts are expected to meet their fourth-quarter earnings estimates, because most analysts have already adjusted their per-share earnings estimates down," said Chad Yonker, an analyst at Fox-Pitt, Kelton. "I don't see any shortfalls out there. Most companies will be within a penny or two of what is expected."

Though last year's increases in interest rates put pressure on net-interest margins for thrifts, some have offset that by moving away from fixed-rate mortgages to adjustables, Mr. Yonker said.

Some thrifts clearly have been hurt by higher short-term interest rates, which have flattened the yield curve and put pressure on net interest income.

Washington Federal Inc., a $5.7 billion-asset thrift in Seattle that reported its fourth-quarter earnings Wednesday, missed its consensus earnings per share by 2 cents as a result of a lower net interest margin. The company reported fourth-quarter earnings per share of 51 cents, the consensus was 53 cents, according to First Call/Thomson.

In San Mateo, Calif., $5.9 billion-asset Bay View Capital Corp. said Dec. 28 that it would fall short of analysts' estimates as a result of problems integrating its November purchase of Franchise Mortgage Acceptance Co. The company said it expected fourth-quarter earnings of 17 cents to 21 cents. It was expected to earn 38 cents.

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