Washington Mutual Inc., buoyed by the effects of falling interest rates, sees rosy days ahead.

In meetings with reporters this week, executives from the Seattle thrift talked in glowing terms about how they had taken the relatively dull business of mortgage lending and servicing and turned it into a machine that generates twice the rate of growth in earnings per share each year as that of a "typical" top 10 bank. "When I look out over the foreseeable future I think that we are in an earnings momentum period here that is likely to produce results that are far superior to what's going on in the major bank holding companies," said Kerry Killinger, Washington Mutual's chairman and chief executive officer, in an interview late Tuesday.

Falling interest rates are boosting short-term results. In April, Washington Mutual told analysts to raise their expectations for the year, and it seems certain to give the same guidance when it releases second-quarter profits in July.

The factors aiding Washington Mutual are likely to give at least as big a lift to other thrifts. Wamu has often said that it is protected from interest rate swings because it participates in both the mortgage origination and servicing markets, which tend to balance each other depending on market conditions.

Mr. Killinger has a longstanding goal of achieving 18.6% annual growth in earnings per share. "It will be interesting to see what happens in the next several quarters, as I expect the earnings momentum for us on a relative basis may look even better," he said.

The outlook is in contrast to a spate of earnings warnings that dribbled out of some of the nation's largest commercial banks last week. J.P. Morgan Chase & Co. warned of lower revenues this year from trading and said losses in private equity could dampen second-quarter results. Bank One Corp. said ongoing restructuring of its commercial loan portfolio would mean that second-quarter profits would be in line with those reported in the first quarter.

And Wells Fargo & Co. warned of a $1 billion writedown in private equity.

Analysts said they expect other thrifts to do well for the near future as falling interest rates make borrowing money cheaper and lending it more profitable. "We expect to see reports that are on target, if not above," said Thomas O'Donnell, an analyst who follows the thrift industry for Salomon Smith Barney.

Thrifts are creating a "winning formula" by keeping costs down, and they have healthy credit quality - two things overlooked by investors, Mr. O'Donnell said.

"As long as they stick to their basic business, thrifts will be a good story. The earnings will be there," he added.

Like other thrifts, Washington Mutual has been trying to diversify into fee businesses and higher-margin lending, essentially becoming more "bank-like." For example, one of its goals is to change the mix in its loan portfolio from 20% nonresidential loans to 40% by 2004.

Ironically, Mr. Killinger seems to be emphasizing the differences between his thrift company and commercial banks and coming out squarely in favor of thrifts.

The thrift strategy has "actually been a superior strategy than most that have followed a commercial strategy," Mr. Killinger said. "I think you've got a wonderful success story here, and you've got people scratching their heads wondering" how it happened coming out of what are perceived as "less sexy businesses."

Washington Mutual's positive view may begin a trend for other thrifts that are also increasing earnings per share, said Bruce Harting, an analyst with Lehman Brothers. "This yield curve is very powerful as a positive. It will be a precursor for many" others, he said.

The thrifts are seeing better earnings for several reasons, including strong credit, continued net margin expansion, and the opportunity to buy back stock, Mr. Harting said. He pointed out that such companies as Golden State, Dime, and Golden West are rated "market outperform."

Washington Mutual rose 2.1%. Shares of Golden State Financial Corp. rose 0.8%, and shares of Dime rose 0.4%. Golden West rose 0.4%.

Patrick Reilly contributed to this article.

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