Calfed loss forecast raises queries about other S&Ls' outlook.

Calfed loss forecast raises queries about other S&Ls' outlook

Calfed Inc.'s announcement last week that it will set aside $200 million in reserves for commercial real estate loan losses in fourth-quarter 1990 may prove prologue for other major savings and loans, analysts said.

"I think, reading between the lines, increased regulatory scrutiny can be expected for other thrifts in line for regulatory exams in the near future," said Bruce Harting, an analyst at Salomon Bros. of New York, noting federal regulators recently completed an examination of Calfed.

Great Western Financial Corp. of Beverly Hills, H.F. Ahmanson & Co. of Irwindale and Glenfed Inc. of Glendale will receive results of their examinations by March.

Following examinations, regulators frequently press institutions to increase reserves against possible loan losses, which translates into reduced earnings for institutions, although Calfed officials insisted the move had been made independently.

As a result of the added reserves, Calfed said it expects to report a net loss in the fourth quarter of $140 million, and a net loss for 1990 of approximately $270 million.

Calfed reported net income of $23.6 million for fourth quarter 1989, and $82.4 million for that full year.

Other analysts cautioned about generalizing from Calfed's actions. "It's difficult to predict," said David Hochstim, an analyst at Bear Stearns. "Every company has a different portfolio and Calfed hasn't provided enough information to make generalizations to discuss further even their real estate portfolio, let alone anyone else's."

The amount of Calfed's fourth-quarter reserve was unexpected, said both Hochstim and Harting.

"The size of the fourth-quarter reserves is somewhat of a surprise after the magnitude of the third-quarter reserve ($96 million)," Harting said.

By at least one measure, Calfed has comparatively few loans in risky areas. As of Sept. 30, the company had 31 percent of its total loans in areas other than one- to four-unit residences, the safest category of loan recipients, compared to a group average of 32 percent for the nine largest S&Ls in California, including 20 percent for H.F. Ahmanson and Great Western and 50 percent for Glenfed Inc., according to Salomon numbers.

Real estate loan losses are expected to increase at H.F. Ahmanson and Glenfed because the companies are eliminating real estate development subsidiaries and will attempt to unload real estate from their books, said Gareth Plank, an analyst with Dean Witter Reynolds.

If there is a silver lining to loan-loss clouds, it is that most institutions' increases in reserves against losses have been for increased severity of existing problems and not for new loan problems, Harting said.

Most S&Ls' problem real estate loans were out-of-state commercial development loans made during the booming real estate market of the late 1980s, said Campbell Chaney, an analyst for Sutro & Co. of San Francisco. "The markets became overbuilt and there was not enough occupancy to generate positive cash flow to pay back the loans," he said.

Chaney said that loan-loss problems of the major S&Ls will now shift to California loans. Their severity, he and others said, is difficult to predict and will closely mirror the health of the California economy.

Harting and others said that even in the face of continued rising loan losses, neither Calfed nor the other members of its peer group -- H.F. Ahmanson, Great Western and Glenfed -- face a serious threat to their existence because of their large size, liquidity and continuing loan orginations.

At Calfed, management pointed the finger of blame for increased loan losses at general economic conditions. "Commercial real estate markets have continued to deteriorate from overbuilding, a weaker economy and a scarcity of credit," said Jerry St. Dennis, chairman and chief executive of Calfed.

Calfed Senior Vice President James Hurley said that most of the reserves are being taken for commercial properties outside of California and generally not on residential property. "Our residential real estate is holding up quite well, contrary to a lot of predictions," Hurley said.

One measure of asset health for S&Ls -- nonperforming assets and troubled debt restructurings as a percentage of total assets -- varied widely for the local S&L giants at Sept. 30, 1990, including: 2.08 percent for Calfed, 2.54 for Great Western, 2.25 for Glenfed, and 2.02 for H.F. Ahmanson, with a lower percentage indicating relatively fewer problem assets.

PHOTO : Jerry St. Dennis: Calfed chairman, CEO