Newsletter Challenges Idea of Banks’ ‘Bargain Shopping’ in S&L; Market : BANKING / FINANCE

Bankers often talk about bargains to be had by picking up sick or even healthy savings and loans, something they are allowed to do under the month-old federal law that rescued the S&L; deposit insurance system.

But Gerry Findley, a Brea industry consultant, argues that banks would gain little profit by buying either healthy or sick S&Ls.;

“About the only positive feature I can see is possible market entry into a few desirable areas,” Findley said in his latest California Banking Newsletter.

Banks that acquire S&Ls; would have to keep the operation’s deposits insured for five years by the more costly Savings Assn. Insurance Fund, rather than the less expensive Bank Insurance Fund. And banks would have to pay exit fees to get out of SAIF and entry fees to get into BIF.

“The exit fee is about 1.25% of deposits,” he said in an interview. “For an S&L; with $100 million in deposits, that’s a lot of money to spend” on an exit fee.

Other restrictions would force banks to give up potentially lucrative S&L; operations, like insurance.

And if the obvious restrictions in the law aren’t enough to dissuade banks from such acquisitions, he warns, the language of the law should be.

“It doesn’t always mean what it says,” Findley said. “It’s all up to interpretation by the Federal Reserve Board, the comptroller of the currency and the Federal Deposit Insurance Corp.,” which oversees both deposit funds.

“And we don’t know all the requirements of the State Banking Department yet in converting state-chartered institutions,” he said.

Bank purchases of savings institutions could make sense in some limited ways, he said.

Insolvent S&Ls; in receivership might be a good investment because regulators can convert them to banks without exit and entry fees. Banks also could acquire a limited number of assets from an S&L; and escape the new law’s restrictions, he said.