Savings and loans must diversify from their traditional home-finance focus to survive into the new millennium, according to speakers at a recent mortgage conference here.

One attraction of the thrift charter-and a hot topic of debate in Washington now-is that it "does mix banking and commerce," said Rick McGill, president and CEO of Quaker City Federal Savings and Loan Association in Whittier, Calif. Quaker City specializes in multifamily and commercial real estate loans.

Mr. McGill, in a panel discussion at the western secondary market conference last week, focused on the growing concern over the entry into the thrift business of corporate giants like General Electric and General Motors-both of which possess charters-and of Wal-Mart Stores Inc., which recently positioned itself to enter the financial services realm by acquiring a thrift. Nordstrom, a department store chain, and insurance companies like State Farm are also planning to use thrift charters to advance into financial services.

"The small banks are truly afraid of some of the implications of the thrift charter down the road, owned by a number of companies," Mr. McGill said.

Traditional thrifts, which use deposits to fund home loans, are now being joined by institutions that build assets outside the traditional branch structure. These include multifamily lenders, commercial real estate lenders, consumer lenders, subprime lenders, and mortgage bankers, Mr. McGill said.

"I think the asset, customer-driven models are going to continue to evolve and thrive," Mr. McGill said. "A focus solely on home loans is simply not going to serve any of us well." Traditional thrifts will "be for sale now or later," he added, because they will not be able to provide the "kinds of returns necessary to operate as independent companies."

Kerry K. Killinger, the chairman and chief executive officer of Washington Mutual Inc., the nation's largest thrift company, said it is "trying to create a whole new marketplace" between commercial banks' and thrifts' traditional territories.

The company also is poised to become a major player in the subprime market when its pending merger with Long Beach Financial Corp. closes, Mr. Killinger said.

With thrift stocks trading "at the lowest relative price-earnings ratio to the marketplace that I've seen in a number of years," Mr. Killinger said, Wamu plans to repurchase up to $2 billion of its common stock.

Wall Street was pleased by the plan for a share buyback. Salomon Smith Barney analyst Thomas O'Donnell said the buyback is "the most favorable news" in the quarter. But he added that he would rather see "growth in earnings per share than balance-sheet growth or geographic expansion." The best strategy is to maximize profitability, he said.

"We expect to be the low-cost originator and servicer in the industry," Mr. Killinger said.

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