Big thrifts got much bigger last year, even as the industry's assets and deposits shrank, according to an American Banker survey.

Assets at the 10 largest thrifts totaled $296.3 billion at yearend, a 51% increase from 1996. (See tables starting on page 12.) Their share of industry assets rose to 29%, from 19%. Competition from outside the industry is driving the consolidation, said analyst Charlotte Chamberlain of Jefferies & Co., Los Angeles. Thrifts "are consolidating for economies of scale on both the lending and deposit (sides) and to better arm themselves against the silver bullet of Microsoft."

The industry leader, Washington Mutual Inc. of Seattle, accounted for most of that jump. Its assets more than quadrupled from the end of 1996, to $97 billion. Most of that increase came from two California acquisitions - of American Savings Bank, Irvine, in 1996 and Great Western Financial, Chatsworth, last year.

Assets of the thrift industry as a whole fell 2% last year, to $1.026 trillion. Deposits totaled $704 billion, down 3%. But deposits at the 10 biggest thrifts were up 39%, to $169.7 billion, with most of the increase attributable to Wamu's acquisitions.

Deposit concentration gives Wamu unusual pricing power over a popular adjustable-rate mortgage that is linked to the 11th District cost-of-funds index. When the second-largest thrift, Home Savings of America, Irwindale, merges into Washington Mutual later this year, Wamu will account for 48% of deposits in the index, Ms. Chamberlain noted.

To the extent Wamu funds its growing mortgage portfolio with debt rather than deposits, its funding costs and the index will go up even if deposit rates fall, she said.

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