AN INDUSTRY IN TRANSITITON
America's thrift industry is on the road to recovery, after the most traumatic period in its history. But, many of its members are still weak -- some of them crippled -- and the industry as a whole remains vulnerable to any sharp increase in interest rates.
Barring any such increase, the industry is expected to generate record profits this year, with some estimates ranging as high as $5 to $7 billion. That would mark the second consecutive year of robust profits, following last year's earnings of $3.8 billion (just below the record $3.9 billion set in 1979.)
More importantly, it would strengthen the industry's return on assets -- last year's performance represented an overall return of 0.39%, still far short of the record 0.67% achieved in 1979 -- and allow it to rebuild its depleted net worth.
The present earnings boom reflects a pronounced decline in interest rates and two years of record mortgage lending, among other factors. But, while 85% or more of the industry's members are now profitable -- some more than others -- a substantial minority remains deeply troubled. Many are technically insolvent but have been allowed to remain open by hard-pressed regulators; even more are using officially-sanctioned accounting devices to make their balance sheets look stronger than they really are.