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California and the West

Golden West Earnings Disappoint

July 21, 2006|E. Scott Reckard | Times Staff Writer

Golden West Financial Corp. reported 8% higher second-quarter profit Thursday but missed Wall Street estimates, saying it experienced fierce competition as interest rates rose and the mortgage market shrank.

The Oakland-based parent of World Savings Bank earned $390.4 million, or $1.25 a share, up from $360.4 million, or $1.16, a year earlier. Quarterly revenue rose 12%, from $832 million to $933 million.

Analysts on average had expected Golden West, the second-largest savings and loan after Washington Mutual Inc., to earn $1.29 a share.

Mirroring a national trend, Golden West's volume of new loans fell by 13% to $11.7 billion in the quarter. But the amount of mortgages on its books rose and credit quality remained strong, said Chief Executive Marion Sandler.

The company's deposits grew $651 million in the quarter, compared with an increase of $3.6 billion a year earlier. Sandler attributed the slowdown to "aggressive pricing by our competitors and renewed interest in the stock market."

Golden West shares fell 62 cents to $74.18.

Golden West's pending $25.5-billion acquisition by Charlotte, N.C.-based Wachovia Corp. would result in a far wider range of financial products available to its customers, Sandler said.

Wachovia's acquisition of Golden West would give its retail business a national reach. Golden West has more than 280 World Savings branches in 10 Western states and mortgage operations in 39 states.

Wachovia, the fourth-largest U.S. bank and a retail powerhouse in the Northeast and South, reported 14% higher profit Thursday. Second-quarter net income rose to $1.89 billion, or $1.17 a share, from $1.65 billion, or $1.04.

Revenue also grew by 14%, to $7.3 billion, driven in part by the company's $3.4-billion acquisition this year of Irvine-based auto lender Westcorp.

Wachovia's earnings beat Wall Street expectations by 2 cents a share, but its shares fell 69 cents to $54.24.

That decline reflects investors' worries that Wachovia is paying too much for Golden West, particularly in light of the Oakland thrift's weaker-than-expected earnings, said Richard X. Bove, an analyst at Punk Ziegel & Co.

In other bank results posted Thursday, Cathay General Bancorp said second-quarter earnings rose to $29.1 million, or 56 cents a share, from $25.7 million, or 51 cents, on strong loan growth.

Cathay Chairman Dunson Cheng said the Los Angeles-based bank was retaining customers and key officers from its acquisition of Great Eastern Bank in New York. Cathay plans to open a new loan office in Dallas and a branch in Bellevue, Wash., this year.

UnionBanCal Corp., based in San Francisco, said net income declined to $182.9 million, or $1.26 a share, from $187.2 million, or $1.27, a year earlier. Strong loan growth and solid credit quality offset the effects of rising interest rates and stiff competition for deposits, said Takashi Morimura, UnionBanCal's president and chief executive.

Both Cathay General and UnionBanCal reported results after U.S. stock markets closed. UnionBanCal shares dropped $1.66 to $63 in after-hours trading.

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