Lehman Brothers analyst Bruce Harting, whose firm represented Washington Mutual Inc. in its aborted bid to buy $9 billion-asset Coast Savings Financial last year, is touting Coast as the next California thrift to be acquired.
In a July 7 report titled, "Coast Savings Financial: Quietly Moving to the Forefront of the California Thrift Industry," Mr. Harting predicted the Los Angeles thrift, which closed Wednesday at $48.125, could sell at $49 to $63 a share within 24 months.
And he isn't ruling out $92 billion-asset Seattle-based Washington Mutual as a potential acquirer, though it has bought two California thrifts in eight months-Chatsworth-based Great Western Financial, with $43 billion of assets, in July, and Irvine-based American Savings Bank, with $20 billion of assets, in December. (Lehman represented Washington Mutual in its bid for Great Western as well.)
In an interview Wednesday, Mr. Harting said he also views H.F. Ahmanson & Co., BankAmerica Corp., NationsBank Corp., and First Bank System Inc. as potential Coast acquirers over the next two years.
During that period, Mr. Harting predicted, Coast's stock will appreciate rapidly, fueled by earnings growth and the anticipated settlement of Coast's lawsuit against the federal government over accounting methods for its acquisition of troubled thrifts.
Thanks in part to the scarcity of California banking franchises in a consolidating market, Coast's stock hit a high of $48.75 in March, up from $36.375 at the beginning of the year.
But for the sudden availability of Great Western this spring, Coast might already have been a part of the Washington Mutual empire. Washington Mutual chairman Kerry Killinger dropped Coast in favor of Great Western, which had launched an urgent search for a white knight to repel the hostile bid from the state's largest thrift, $47 billion-asset H.F. Ahmanson, Irwindale.
So how does Mr. Harting see Coast's acquisition playing out?
Coast's prospects depend in part on how quickly large players like Washington Mutual, NationsBank, and First Bank digest the big purchases they've made this year, Mr. Harting said. If those purchases are smoothly integrated, the players will be free to do new deals.
Wells Fargo & Co.'s progress in integrating First Interstate will also be a factor, Mr. Harting said. If Wells continues to stumble, out-of-state banks may be emboldened to come into California, he said.
Coast's appeal to out-of-state banks looking for a vehicle to enter California would appear to be limited due to its focus on home loans. At yearend 1996, 88% of Coast's assets, or $6.94 billion, were linked to the 11th District Federal Home Loan Bank cost-of-funds index.
Mr. Harting acknowledged that impediment, pointing out that only one bank-Norwest Corp.-had taken a serious look at Great Western this spring.
But he maintained that Coast's 90-branch network in Los Angeles and San Francisco, and the scarcity of California deposit franchises make Coast a rich prize.
"Ultimately it just comes down to the price to be paid. If the price is right, the acquirer will overcome any perceived barriers," he wrote.
Elsewhere, Lehman itself was again the subject of merger speculation, this time in a cable television report that named Chase Manhattan Corp. as the acquirer. For the first time, a price tag-$55 to $62 per share-was attached to what has become one of the most persistent rumors on Wall Street.
Lehman stock surged 16.18%, closing up $7.312, at $52.50.
