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Best Managed Mortgage Companies

Forbes announces Platinum 400

January 20, 2006

By COCO SALAZAR


photo of Coco Salazar

There was no shortage of mortgage-related companies on the latest list of the nation's best-performing companies.

Forbes magazine recently released its Platinum 400, also known as the list of America's Best Big Companies.

The magazine ranked candidate entities for financial performance against their industry peers across 26 industry groups over the latest five years and the most recent 12 months. The finalists were selected based on sales and earnings growth, stock market returns and debt to total capital, as well as their consensus forecasts for long-term earnings growth.

The magazine then evaluated the leading companies in each sector on factors such as innovation, efficiency and market leadership, to come up with the best-managed company in each of the 26 industries.

Forbes recognized M&T Bank as the best-managed company in the banking industry. With a 17.0% five-year return, the parent of M&T Mortgage ranked 225 amongst all companies and eighth within banking companies. However, noting that much of M&T's growth to $55 billion in assets is through acquisition, like is the case for many large banks, Forbes commended M&T because it "stops to digest its meal before moving on to the next one" by closely observing details such as travel expenses, procurement contracts and even cleaning services, hoping to save $50 million.

"That kind of scrutiny should keep shareholders, who've enjoyed an average 17% return over the past five years, in a happy mood," the magazine said.

Compass Bancshares had the best five-year annualized return in the banking sector with 24.9%, followed by Bank of America's 23%, Commerce Bancorp, Wachovia, Golden West Financial, Marshall and Ilsley, AmSouth Bancorp, M&T, Puerto-Rican based Popular, and Wells Fargo was 10th with 9.9%.

"We are pleased that AmSouth has been recognized ... for strong performance for shareholders," said Dowd Ritter, AmSouth chairman, president and chief executive officer of AmSouth. "The credit should go to our employees for their focus on delivering outstanding customer service, which is at the heart of building solid results."

Citigroup, Synovus Financial, BB&T and Zions Bancorp comprised the remainder of the companies in the banking sector of the Platinum 400.

In the industry of business services and supplies was H&R Block. The parent of nonprime lender Option One Financial Corp. placed 124th overall with its five-year total return of 26.1%.

A five-year return of -4.2% earned General Electric the title of the 380th best-biggest company. The parent of nonprime lender WMC Finance Co. was the only mortgage-related entity in the conglomerates sector.

The top-three five-year return totals of mortgage-related entities in the construction sector were homebuilders William Lyon Homes with a 72.9% return total, followed by Hovnanian Enterprises and Meritage Homes. However, Lennar, which provides mortgages through its Lennar Financial Services companies, took home the award for the best-managed company.

Lennar ranked 88th in five-year return totals with a reported 30.5%. The magazine noted the homebuilder's $14 billion in sales last year and earnings of $1.4 billion, indicating Lennar has mitigated any regional slumps that may occur in the housing market by being geographically diverse, with construction spread evenly across the West, Midwest and East.

"And unlike most of its competitors, Lennar doesn't just build homes," the magazine said. "It works with commercial builders to create entire cities" and recycles military bases Plus, it reportedly maintains $1 billion in cash in hopes to ride out any problem markets.

Mortgage-associated companies on the Platinum 400 within the diversified financials sector, included Berkshire Hathaway, Principal Financial, Capital One Financial and Charles Schwab, but it was Lehman Brothers Holdings Inc. that walked away with the recognition of the best-managed company in this industry. Lehman has wholesale lenders BNC Mortgage and Finance America under its arm.

"While competitors like JPMorgan Chase and Morgan Stanley have struggled to integrate former rivals, Lehman Brothers Holdings, the 151-year-old firm once known primarily as a bond house, has effortlessly diversified into growing capital markets products like mortgage-backed securities," among other things, Forbes said.

"Lehman stock has returned 21% a year over the last five on earnings growth of 9%," the magazine added. "Its economists recently forecast a 20%increase in merger and acquisition activity for the new year. If they're right, and 2006 outpaces the feverish 2005, then Lehman seems well positioned to make new gains."

Mortgage-related entities in the insurance industry that made the list included mortgage insurer Radian Group, LandAmerica Financial, First American and Prudential Financial.


Coco Salazar is an assistant editor and staff writer for MortgageDaily.com.

e-mail: [email protected]


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