Innovative thrift hopes to score in LV with free checking

Phil Levine

Tuesday, March 21, 2000 | 10:53 a.m.

Innovative and unique are not terms usually associated with banks and thrifts.

But Kerry Killinger, chief executive officer of Seattle-based Washington Mutual Inc., says his thrift's future growth and success in Las Vegas are contingent on his bank's unique products and services.

"Our research data shows that customers are first attracted to our bank by our totally free checking," he said.

"That will fuel most of our initial growth. Once they've established an account, customers will then consider moving all their banking over to us."

Killinger is visiting Las Vegas this week, helping to introduce and promote the bank to the business community and potential customers.

The extent of Washington Mutual's uniqueness becomes evident next month as it begins to roll out the first of 21 new Las Vegas branches planned for this year.

The bank currently operates a Las Vegas home loan center at 2625 South Rainbow Boulevard; the center serves about 8,000 Las Vegas customers.

The new local branches, referred to as "concept financial centers," will offer an array of unprecedented services and products.

Killinger says the Las Vegas prototype may serve as a test market for the bank's branches nationwide.

"We will be watching closely to see how our various stores do in both newer developments as well as in older housing markets," he said. "Our research tells us we should do well across the board.

"Las Vegas is a very diverse city, and if these prototypes work well here we may look at using them across the country."

Looking more like a retail store than a financial institution, the Las Vegas branches will feature childrens' play areas, retail financial products, as well as Internet and information kiosks.

Nine Las Vegas branches are slated to open next month, with four more opening in May. The balance of the bank offices will open later in the year.

The bank's flagship store will be at the intersection of West Charleston Boulevard and Rampart Boulevard in Summerlin.

Founded in 1889 as the Washington National Building & Loan after the great Seattle fire, the bank has evolved over the last century to become the nation's largest thrift.

Washington Mutual reported fourth quarter 1999 earnings of $450 million or 80 cents a share, compared with $157 million or 27 cents a share a year earlier.

In recent years, much of the bank's revenue growth has been spurred by California-based acquisitions. Since 1990, Washington Mutual's assets have grown from $22 billion to about $190 billion.

In 1996, the bank acquired American Savings Bank; in the ensuing years, Washington Mutual scooped up Great Western Savings, H.F. Ahmanson and Long Beach Financial, all of California.

The bank has completed 26 acquisitions since 1983 and now operates more than 2,000 offices nationwide.

An 18-year veteran at Washington Mutual, Killinger has set ambitious goals for his company, including a 20 percent or greater return on common equity and increasing earnings per share by an average of 13 percent per year.

Like most of the financial sector, Washington Mutual's stock has lagged in recent months; shares are currently trading around $25, down sharply from a 52-week high of $42.

Still, Killinger says misperceptions about his bank's business linger on Wall Street.

"It's difficult for some people to know what to call us," he said. "Unlike most thrifts -- or the old savings and loan (banks) -- our products are very broad, and we are truly a full service bank."

He conceded that Wall Street remains concerned about the bank's concentration on home loans, and said Washington Mutual is working hard to diversify its lending activity.

"Most of the companies we acquired in California over the last few years were very heavy in home loan products," he said. "However, we're now aggressively working at diversifying that mix."

Killinger acknowledged the shifting sands of Las Vegas' banking sector may provide his bank an opportunity to attract dissatisfied customers from competitors.

Washington Mutual's arrival in Las Vegas coincides with the scheduled merger of Salt Lake City-based rivals First Security Corp. and Zions Bancorporation, parent of Nevada State Bank.

However, several glitches have called into question whether that union will be consummated as planned.

"We have really set our sights on our two biggest competitors in this market, Wells Fargo and Bank of America," he said. "However, anytime someone goes through a systems conversion -- or a merger -- experience tells us it can prove helpful to us."

Looking to open locally on a positive note, the bank is donating $30,000 in grants to Southern Nevada charities. Washington Mutual will also donate $10 to the Clark County Public Education Foundation for each new account opened until May 20, 2000.

Despite the unprecedented design of the thrift's Las Vegas offices, Killinger says the new concept is less risky than strategies used by other banks entering new markets.

"Our research data shows us that it's a far more dangerous strategy to replace people with technology, as other banks have done," he said. "By contrast, our focus (in Las Vegas) is on people and making their (banking) service experience even better."