Thrift stocks left other financial stocks in the dust last week, and Wall Street analysts doubt they'll run out of gas anytime soon.
American Banker's thrift index jumped an impressive 3.51% last week, while the bank index gained only 1.34% in the same period.
Thrift shares have surged in the past month; the recent lift is the result of the savings and loan insurance bill pending in Washington, said analysts.
The legislation, approved by the House of Representatives on Saturday and expected to pass the Senate as early as Tuesday, would lower the amount that thrifts pay on their deposit insurance, said analyst Thomas O'Donnell of Smith Barney Inc.
If the bill passes "thrifts would have to pay a one-time assessment charge," he said. "But the market is looking beyond the hit and toward the good news that the premium thrifts will ultimately pay will be as low as banks." Thrift earnings could grow as much as 6% to 8%, Mr. O'Donnell estimated.
The pending legislation, which concerns the Bank Insurance Fund and Savings Association Insurance Fund, also spurred Goldman, Sachs & Co. to upgrade First Fed Financial Corp. to "market outperformer" from "market performer."
"I see an earnings boost that doesn't appear to be fully factored into the stock," said Goldman thrift analyst Michael Hodes. He expects his 1996 and 1997 earnings estimates of 1.25 and $1.90 to increase; his target price is $23 to $24 in a 12 months.
Even if the BIF-SAIF bill is not passed, Mr. O'Donnell is still bullish on thrift stocks because of their strong earnings and its low earnings multiples - under 10 times next year's estimates. In addition, the analyst noted that a "whiff of takeover speculation," is also driving up thrift stocks.
California, with its gigantic thrifts, is the next hot spot for consolidation because of its improving economy and because the state has yet to experience a takeover wave like Florida and New England, he said.
In other news, Goldman added Bankers Trust New York Corp. to its "U.S. Recommended List" on Monday, citing the company's potential for earnings.
Goldman money-center bank analyst Robert B. Albertson said he expects a potential price upside of over 30%, or $103 per share valuation. Bankers Trust shares gained $1 to $78.625 on three times daily volume.
Lehman Brothers Inc. upgraded New York thrift Greenpoint Financial Corp. to "outperform" from "neutral." Greenpoint shares rose 37.5 cents to $38.125.
Keefe Bruyette & Woods downgraded Dauphin Deposit Corp., Harrisburg, Pa., to "underperform" from "market perform." Dauphin shares fell $1.625 to $31.
Keefe analyst Marni Pont said Dauphin's stock surged 13% last week on takeover speculation. "An offer did not appear and there is a downside risk if nothing materializes," she said.
Natwest Securities reiterated its "buy" rating for SignetBanking Corp., Richmond, Va., last week's biggest performer among bank stocks. But at the same time, Natwest lowered its earnings estimates. Signet's stock rose $37.5 cents $26.75 on heavy volume.