April 16 (Bloomberg) -- Billionaire financier Wilbur Ross Jr., who made his fortune turning around distressed steel and textile companies, plans to seek about $4 billion from investors including Arab sovereign funds to buy U.S. depositary banks.

Ross, 70, will talk with Gulf investors in Abu Dhabi next week about 100 to 200 so-called thrift banks, he said in a phone interview from New York today. He said some of the lenders are good investments, even after a mortgage-market slump led to $245 billion of asset writedowns and credit losses at the world's biggest banks.

Regional depositary banks have ``more narrowly defined'' problems and ``a more stable base of deposits'' than cross-border lenders such as Citigroup Inc. and UBS AG, Ross said. He plans to package U.S. thrift bank acquisitions ``as a finished product'' to sovereign wealth funds, he said.

Flush with cash from record oil income, Gulf funds are among investors that committed at least $59 billion in the past year to shore up banks including Citigroup and Merrill Lynch & Co. Abu Dhabi's sovereign fund, the world's richest with estimated assets of $875 billion, agreed to invest $7.5 billion in Citigroup in November. Qatar's fund will spend as much as $15 billion on bank stakes, the Gulf state's prime minister said in February.

Thrifts Are `Vulnerable'

Thrifts are ``particularly vulnerable because their portfolios tend to be so real estate-oriented,'' and so can be bought ``at a very attractive price,'' Ross said today. Acquired banks could be combined with a mortgage business to provide stable funding for home loans that are ``essential'' to the U.S. economy even if ``singularly unprofitable'' right now.

Depositary banks are regulated by the Federal Deposit Insurance Corp. and can accept consumer deposits. The FDIC insures deposits at 8,534 banks and savings associations in the U.S., more than 90 percent of which are community-based banks. Thrifts can be savings and loans, credit unions or savings banks.

Each thrift acquisition would probably be valued at around $500 million, Ross said. His buyout company, WL Ross & Co., may invest about $2 billion of its own money in the acquisitions. The firm has ``relations and existing investments'' with some Gulf sovereign wealth funds, he said, without providing names.

Washington Mutual Inc., the biggest U.S. savings and loan institution, on April 8 said it got $7 billion from a group of investors led by David Bonderman's TPG Inc. after losses on subprime loans erased 74 percent of its market value.

`Less Than Satisfactory'

Citigroup stock has slumped 24 percent since it announced Abu Dhabi's investment on Nov. 26. Merrill Lynch is down 16 percent since Kuwait's fund said it bought $2 billion of convertible securities Jan. 15.

``Some of the initial forays have been less than satisfactory, at least on a temporary trading basis, so there is obviously a degree of caution,'' by Gulf funds, Ross said.

Investors like Ross can profit from a decline in value of financial-services companies amid the U.S. subprime crisis, said Steven Kaplan, a professor of finance at the University of Chicago's business school.

``Financial companies have declined in value a lot,'' Kaplan said in a phone interview today. ``I'm sure many of them deserve to have declined. But some of them probably haven't, and those are the ones he's going after.''

Ross is already betting on the mortgage-servicing industry, which processes loan payments and forecloses on bad mortgages. Servicing companies can gain value during housing slumps because borrowers are less likely to move or refinance, making the stream of fees paid by a mortgage owner last longer.

Acquisitions

Ross is seeking to acquire H&R Block Inc.'s mortgage- servicing unit for $1.1 billion. His AH Mortgage Acquisition Co. this week closed its purchase of an American Home Mortgage Investment Corp. subsidiary. That transaction was valued at about $500 million last year.

Ross's firm joined with Richard Branson's London-based Virgin Group Ltd. earlier this year to bid for U.K. lender Northern Rock Plc. The bank was taken over by the U.K. government instead. The collapse of the U.S. subprime mortgage market lifted the cost of credit around the globe and led to a run on Northern Rock last year.

Ross said today that the Northern Rock bid provided ``knowledge we'd like to put back to work'' if the right opportunity arises in the U.K. mortgage market.

Ross is scheduled to speak at a conference in Abu Dhabi April 21 organized by the Asian Venture Capital Journal.

To contact the reporter on this story: Will McSheehy in Dubai at wmcsheehy@bloomberg.net

Last Updated: April 16, 2008 15:52 EDT