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Non-Tech : Golden State (GSB) formerly Glendale Savings
GSB 9.4800.0%Aug 28 5:00 PM EST
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To: Paul Lee who wrote ()3/5/1999 9:19:00 AM
From: Paul Lee   of 75
 
Steepening Yield Curve Creates
Ideal Situation for Golden State
By GREGORY ZUCKERMAN
Staff Reporter of THE WALL STREET JOURNAL

Bond prices are getting whacked. An interest-rate boost could be coming. So why are some people excited about Golden State Bancorp., the California thrift controlled by financier Ronald Perelman?


Rising interest rates typically wreak havoc with earnings of financial stocks, especially thrifts. That's because the interest rates they pay on deposits and borrowings goes up as short-term rates rise. Climbing rates also weigh on the economy, slowing lending activity.

But longer-term rates have been rising much more quickly than short-term rates lately, a so-called steepening of the yield curve. This is good news for Golden State, because it can now charge higher rates on home mortgages, the thrift's biggest product and about 60% of the company's revenue. A steeper yield curve also makes adjustable-rate mortgages, which comprise 78% of Golden State's loan portfolio, more popular. And as long as rates stay at these higher levels, mortgage refinancings should slow, alleviating pressure on the thrift's balance sheet.

Of course, the yield curve could reverse itself. Critics cite concern about the thrift's relatively high debt level. And there are doubts about how well Golden State will meld a growing stable of thrift franchises.
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