Thrift stocks are back in favor after falling out earlier this year when investors rushed into the higher-risk bank stock universe.

Shares of savings banks ran up last year only to fall after the New Year on profit taking, analysts said. Now, with an uncertain future for the economy, analysts said thrift stocks are a safer place to be. “After the fabulous performance in 2000, profit taking put downward pressure on thrifts,” said Mark Fitzgibbon, an analyst at Sandler O’Neill & Partners. But, he added, “there is a favorable round of earnings coming up, which will trigger positive ratings and translate into higher stock prices.”

Other analysts echoed that notion. Considering the thrifts’ lower credit risk and strong earnings, “conditions couldn’t be better,” said Gary Gordon, an analyst covering specialty finance firms for UBS Warburg.

Thrift shares dipped just 0.3% in the past five days, while the bank index fell 3.9%. For the month, thrift stocks have risen 5.2% and the index of bank stocks has dropped 2.2%, according to American Banker data.

Banks roared back Tuesday, at the beginning of the first-quarter earnings season, as the Dow Jones industrial average climbed above 10,000 again. The American Banker index of 225 banks rose 3.82%. The thrift index dipped 0.44%, but only Washington Mutual Inc. sagged; most other thrifts rose.

The Standard & Poor’s 500 index 2.7%, and the Nasdaq soared 6.09%.

Mr. Fitzgibbon upgraded Roslyn Bancorp to “outperform” from “market perform,” because of the company’s large residential mortgage loan portfolio, a favorable interest rate environment, and the company’s own share buyback activities.

On the other hand, Mr. Gordon downgraded shares of Washington Mutual to “hold” from “buy” because he thinks the stock is at the higher end of its historic performance, and he said he sees slower earnings ahead for next year.

On Tuesday, Roslyn was up 2.78% to $24.04, while Washington Mutual fell 4.25% to $53.

“While we are normally hesitant to change a stock rating just before earnings season, we thought it very necessary given the recent share price weakness and our strong confidence in our first-quarter earnings per share estimate of 40 cents,” Mr. Fitzgibbon wrote in his research note. Roslyn will report earnings on Thursday. His full year outlook is $1.77 for 2001 and $1.95 for 2002.

He said shares of the company had fallen 14%, and now trade around 11.9 times earnings. Expansion may be another opportunity for Roslyn, Mr. Fitzgibbon said. Long Island has 139 banks, enough to give the Jericho, N.Y.-based thrift a lot of room to consolidate, if it is not taken over by larger players eager to extend their New York operations, he said.

Mr. Gordon lowered his outlook for Seattle-based Washington Mutual’s 2002 earnings by 15 cents to $4.75. He said he expects the company to earn $4.45 for this year and 83 cents for the first quarter. Washington Mutual will report next Wednesday.

Analysts did sound more cautious about the performance of thrift shares over the longer term, particularly next year. “The more we look at 2002, the more challenges we see,” Mr. Gordon wrote in a research note.

Margin expansion due to falling interest rates will eventually slow, he said. The current refinancing boom will end, and long-term interest rates might rally, he wrote, putting pressure on thrift earnings growth.

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