Even as he absorbs two of the nation's largest thrifts, Kerry K. Killinger says his drive to make Washington Mutual Inc. "a world- class institution" could take him on the acquisition trail again.

The chief executive of Washington Mutual said his Seattle-based thrift needs to broaden-via acquisitions or internal growth-its mutual fund, commercial lending, and consumer finance operations.

"I don't think we're going to be out of the expansion game for a long time," Mr. Killinger said in a wide-ranging interview at a conference here.

Mr. Killinger's appetite for more deals stands in contrast to statements by other expansion-minded CEOs.

In recent weeks First Union Corp.'s Edward E. Crutchfield has stressed the virtues of restrained, no-premium deals. And Banc One Corp.'s John B. McCoy said he plans to steer clear of big deals while his company digests First Chicago NBD Corp.

But one week after Wamu wrapped up its 1997 purchase of Great Western Financial Corp. by melding 4.7 million accounts and 372 branches, Mr. Killinger said he is hungry for more.

Indeed, he is planning to expand even as he undertakes an even bigger task: integrating $53 billion-asset H.F. Ahmanson & Co., which Wamu agreed to buy in March.

Specifically, Mr. Killinger said he is "very interested" in expanding the $5 billion-asset portfolio of 19 mutual funds offered by his institution. More than most bankers, Mr. Killinger is steeped in the brokerage business, having joined Wamu via its 1982 acquisition of Murphey Favre Inc.

"We will continue to be on the lookout for acquisitions of mutual fund complexes," he said. "The banking industry in general is not keeping pace with the growth in assets that are being funneled to mutual funds, pension plans, and securities."

An expansion in the area of business lending is also on the horizon, Mr. Killinger said. Though Washington Mutual offers small-business loans of under $100,000 through its retail branches, its ability to offer credit of up to $5 million needs to be expanded, he said.

Through its 1995 acquisition of Oregon's Western Bank, Wamu has built a commercial banking unit with $1.4 billion of assets with 70 offices in Washington, Oregon, Idaho, and Utah. The next step is to begin offering larger small-business loans in California, Mr. Killinger said. And he plans to hire staff familiar with this kind of lending.

"There is a great opportunity to bring on personnel from larger commercial banks that are merging," he said. "We seem to have a real flow of people that want to join our organization."

Right off the bat, however, the most important area for Washington Mutual to flesh out will be consumer finance, observers said.

Because the free checking accounts offered by the thrift are attracting "essentially subprime customers who keep average balances of around $900," the thrift must build a stronger ability to offer them appropriate loan products, according to R. Jay Tejera, an analyst at Dain Rauscher, Minneapolis.

Added James R. Bradshaw, an analyst at Pacific Crest Securities, sponsor of the conference: "They really need to build a strong national presence in this area, and subprime lenders are" weak right now, "so it is a good time to buy."

Through its Great Western acquisition, Washington Mutual gained a respectable 493 consumer finance offices. But the Great Western unit, called Aristar Inc., focuses primarily on unsecured lending and appliance credit, not home equity or subprime loans.

Mr. Killinger said he views Aristar as a platform for further growth. By the end of the year, he said, he expects to begin an expansion of the unit through "both internal growth and acquisitions."

"The consumer finance business clearly beats our 18% return on equity threshold, and with our capital and position we can be a major player," he said.

Mr. Killinger is not letting Wamu's lack of a full array of financial offerings slow him down. He predicted that Washington Mutual will meet with even greater success in California than it has in the Northwest.

"The levels of service offered in California by our major commercial bank competitors are not up to the standards of what most are delivering in the Northwest," he said. "Our market research tells us that the propensity of customers at these banks to be seeking an alternative is much higher in California than what it is in the Northwest."

Mr. Killinger also seemed confident about Washington Mutual's ability to do battle with the new BankAmerica Corp. and Wells Fargo & Co. Washington Mutual has been steadily gaining more experience competing with BankAmerica's merger partner, NationsBank Corp., through its acquisition of 118 branches in Florida through the Great Western deal.

"We are learning more and more about NationsBank, and we know BankAmerica very well right now," he said.

As for Wells Fargo, "we certainly know how to compete with Wells and will naturally be studying Norwest more and more to see how we can best compete with them.

"I suspect the next few years could be extraordinary, particularly if there are any glitches in the executions of the combinations of some of these banks."

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