The top performers in mortgage-related businesses are investment banking firms, according to a ranking of companies by financial performance.
At No. 26 on the 2006 BusinessWeek 50 was D.R. Horton. The homebuilder, whose profits have risen every quarter since its founding in 1978 and maintains a balance sheet that is stronger than ever, was ranked third highest among all mortgage-related entities.
The ranking reportedly reflects the best of the Standard & Poor's 500-stock index. Among the items BusinessWeek says it analyzes to compile the ranking are sales and earnings growth for the most recent one- and three-year periods, long-term earnings prospects, net profit margins, total shareholder returns for one- and three-year periods, sales volume and debt-to-capital ratio.
Texas-based D.R. Horton's net income has more than doubled over the past three years to $1.5 billion. The parent of DHI Mortgage is confident it will hit its target of selling 100,000 homes in 2010, double its industry-leading sales in 2005, BusinessWeek said, noting, however, that one risk is the 28 percent of last year's unsold land and homes was in bubbly California.
JPMorgan Chase filled spot No. 28 as an increase in investment banking fees has pumped its bottom line. The New York-based bank's net income of $8.5 billion grew by 90 percent over the past 12 months. The magazine said it estimates JPMorgan will grow by 10 percent in the long run.
Merrill Lynch, which recently announced it would buy jumbo mortgages on a correspondent basis, ranked No. 29 on the list. Merrill's global markets and investment banking net revenues rose 25% in 2005, profits have tripled to $5 billion and its stock price has risen 47 percent since 2002. The mortgage-backed securities player is building a presence in everything from wealth management advice to private equity, will book an after tax gain of about $1 billion in exchange for combining its asset management business with BlackRock Inc. and a buying of a regional retail broker or bank may be its next move, according to the magazine.
In No. 33 was Prudential Financial, which the magazine said saw profits rise 49% last year to $3.6 billion, while its stock soared 33% -- more than twice as much as its insurance industry peers. Prudential's status as the No. 3 U.S. provider of broker-sold variable annuities has been generated in part by acquisitions, including its recent one of Allstate Corp.'s variable annuity business, has some $3 billion in capital to play with in an industry that is ripe for consolidation, the magazine said.
Lennar occupied spot No. 42. The homebuilder, which provides mortgages through its Lennar Financial Services companies, had five-year compound annual growth of 42 percent in profits and 24 percent in revenue. Lennar's $1.4 billion net income grew 42 percent and about 34 percent within a one- and three-year period, respectively, BusinessWeek said.
Lehman Brothers Holdings took spot No. 16 -- the second highest-ranking mortgage-related position and way better than its rank of No. 151 in the previous year.
BusinessWeek noted the profits of Lehman Brothers, which ranks third in global mergers and acquisitions, have more than tripled since 2002 to $3.3 billion, its stock price is up 132% over the same period, and for the third consecutive year, its U.S. equity research staff earned top honors in Institutional Investor magazine's annual survey.
The top-performing, mortgage-related entity on the list was Goldman Sachs Group, which jumped to No. 15 from last year's rank at No. 116. The mortgage-backed securities player was commended for its "killer combination" of businesses. Its trading and investment unit churned out $6.2 billion in pretax income in 2005, while its investment banking advisory division -- one of the strongest in the world -- pumped out $413 million.
"With dealmaking expected to stay robust and Goldman's traders thriving in commodities, fixed income, and equities alike, analysts are bullish on the company," the magazine said. "But as Goldman and its clients invest more often together, its risk profile may rise. So far, though, shareholders don't seem to mind."
Net income of $5.6 billion grew 24 percent and 40 percent over the year and since 2002, respectively. Sales of $43.4 billion grew 45 percent and 24 percent in the comparable periods, BusinessWeek reported.