Thrifts: The Rich Get Richer, the Poor May Die/Profit Forecasts Are Down, but Not to Worry

All thrifts will not benefit from lower interest rates. Healthier ones will definitely get richer while the poorer ones may go broke. For the short term, cheap money is a boon to thrifts, spurring a spree of house-buying and refinancing that will boost loan volume and fee income. Falling rates also help thrifts' portfolios and increase their profits. Still, the poorer thrifts have not been able to stave off trouble. As these weak thrifts get weaker, more business is likely to be diverted to the healthy thrifts. However, industry experts are concerned that thrifts will hang on to the fixed-rate mortgages, thus making themselves vulnerable when rates rise again. While thrift executives insist they are only holding on to adjustable-rate mortgages, these only account for 31% of the industry's total loans. Meanwhile, brokerage house analysts are revising their estimates downward, but the cuts in profit estimates are fewer this year than last. Cheap energy and lower interest rates are expected to spark strong earnings in the 2nd half of 1986.