An improving Southern California economy drove up the fourth-quarter earnings of several banks and thrifts in the region, particularly H.F. Ahmanson & Co., signaling a strong 1997, analysts said.

The $50 billion-asset Ahmanson, Irwindale, Calif., blew away analysts' expectations for the quarter, registering a 50% increase in net income, to $91.2 million, including some one-time events.

"I'd say this was a major transition quarter for these companies," said Charlotte Chamberlain, banking analyst at Wedbush Morgan Securities in Los Angeles. "Clearly, the economy is turning around, and all these institutions are benefiting, some with a lag and some sooner."

Ahmanson, parent of Home Savings of America, the nation's largest thrift, is seeing some fruits of the turnaround now.

Its earnings per share jumped to 74 cents, well above the 60 cent-per- share analysts' consensus compiled by First Call Corp., an American Banker affiliate.

Even excluding one-time gains, such as the sale of some Texas branches and an insurance refund from the Federal Deposit Insurance Corp., the thrift achieved per-share earnings nearly 5 cents above the analysts' forecast.

The company's efforts to become more banklike paid off last year, particularly in the performance of its mutual fund unit, Griffin Financial Services. The subsidiary contributed to a 66% increase in fee income during the quarter, to $44.2 million.

"I really don't see too many negatives here," said Thomas O'Donnell, thrift analyst at Smith Barney. "We're seeing an improvement in credit quality, a continued transition to becoming more like a consumer bank, and an aggressive stock buyback. I think we'll see a lot of investor activity here in 1997."

On the downside, the company did not appear to benefit from the region's improved housing market. Mortgage originations stood at $1.2 billion for the quarter, down from $1.6 billion in the same period of 1995.

"At a time when we're seeing the highest real estate sales since 1989, they have lost significant market share - about half of what they did in 1989," said Ms. Chamberlain.

The main reason is that Ahmanson cannot be as aggressive on pricing as some of its nonthrift competitors, because its origination costs are higher, she said.

Downey Financial Corp. of Newport Beach, Calif., reported quarterly numbers that contrasted somewhat with Ahmanson's - Downey's originations went way up, but earnings improved only slightly.

The $5.2 billion-asset thrift earned $8.7 million in the quarter, up 5.1% from the year-earlier period. Its earnings per share of 34 cents were a penny below analysts' consensus estimates, according to First Call.

Despite its slow growth, Downey registered a more than threefold increase in single-family loan originations from a year earlier, to $406.1 million.

"The fact that Downey was strong on loan originations confirms that the consumer side of this business in California is pretty good," said Campbell Chaney, a banking analyst at Sandler O'Neill Partners, Walnut Creek, Calif.

But improvements in the consumer sector have yet to trickle down to Downey's bottom line, analysts said.

The lag could be attributed in part to an increase in expenses, which grew to $24.7 million in the quarter, up from $20.1 million the year before.

Part of the increase came from the company's openings of supermarket branches. Nearly half of a planned 40 branches are in place, analysts said.

Observers were nevertheless heartened by credit quality at Downey and its peers, further evidence that the asset problems recently plaguing thrifts may now be behind them. Nonperforming assets equaled 1.19% of total assets, compared with 2.09% a year earlier, Downey reported.

Credit quality remained roughly the same at City National Corp. of Beverly Hills; nonperformers increased by $1 million, to $56.7 million for the quarter. The $4.2 billion-asset company reported solid earnings, posting net income of $16.9 million, up 26.7% from the year before.

It earned 37 cents per share - a penny less than analysts had expected.

"They are very active in managing their capital and continue to find productive ways to use it, such as the acquisitions that are closing this month," said Jeffrey Miller, banking analyst at Keefe, Bruyette & Woods Inc.

The bank is closing three deals in surrounding counties on top of a fourth that closed a year ago. The resulting increase in size, as well as the recovering economy, contributed to 21% loan growth during the quarter, to $2.8 million, the bank reported.

The bank's fourth-quarter numbers also reflected the cost of a lender liability lawsuit, which required a $2 million after-tax charge. City National is contesting its insurance carrier's refusal to cover the damages.

Results at First Hawaiian Inc. of Honolulu fell below analysts' expectations; the company reported earning 64 cents a share in the quarter, compared with the 69-cent consensus estimate.

Net income for the quarter was up slightly, to $20.3 million, and nonperformers remained steady: 1.68% of total loans.

"Hawaii's continuing slow pace of economic growth continues to frustrate our efforts to reduce this ratio significantly," said Walter A. Dods, chief executive.

Among other efforts to improve efficiency, the $8 billion-asset banking company is merging a thrift subsidiary into it, cutting 130 jobs.

Sanwa Bank of California, Los Angeles, doubled net income in the quarter from a year earlier, to $24 million.

Asset quality improved; nonperforming assets as a percentage of total assets declined to 0.86%, from 1.02% last year.

Profitability also improved significantly. Return on assets was 1.25% in the fourth quarter, up nearly 125 basis points from the previous year. Return on equity was 13.5%, a doubling from the 1995 quarter.

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