John F. Maher faced tough questions about Great Western Bank's profitability in his maiden appearance before stock analysts as the thrift's CEO-elect.

Speaking to the New York Society of Security Analysts on Monday, Mr. Maher responded somewhat defensively to a barrage of questions from analysts who follow the mortgage business.

"For once there's light at the end of the tunnel, and it doesn't feel like another train," Mr. Maher insisted.

After several years of low earnings because of losses in the commercial and residential real estate portfolios, Mr. Maher said Great Western expected to meet its return-on-equity target of 15% in the next 12 to 24 months.

He said it would bode ill for current management if the thrift failed to reach that target.

"Maybe some other management will get it there," he said with a note of impatience.

As with other large California thrifts, Great Western's first-quarter earnings remained low because of severe compression of interest margins.

Its interest spread was 2.90%, well short of the company's goal of 3.40%.

Most of Great Western's loan portfolio consists of adjustable-rate mortgages linked to the cost-of-funds index of the 11th Federal Home Loan Bank District. In recent months, the lag in the index has shrunk margins by 33 basis points, Great Western's chief financial officer, Carl F. Geuther, said at the meeting.

But the lag is expected to narrow, and Mr. Geuther said the thrift expects stronger earnings in future quarters.

Mr. Maher said Great Western had aggressively built its ARM portfolio in the first quarter, originating $2.5 billion in new loans, because it expects loan growth to be difficult for the rest of the year.

He acknowledged that Great Western's portfolio is at risk as fixed rates fall and mortgage bankers such as Countrywide Credit Industries Inc. target ARM loans for refinancing.

Mr. Geuther said Great Western has attached prepayment penalties to ARM loans originated through third parties last year.

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