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Biggest & Best

Homebuilder mortgage units top Forbes list

January 15, 2007


photo of Coco Salazar

The best publicly traded mortgage-related companies in America are tied to homebuilders.

Forbes magazine recently released the list of publicly-traded companies to make its Platinum 400.

Businesses that ranked on the magazine's 400 Best Big Companies in America were categorized into 26 industries and compared against their peers on five-year and 12-month sales and earnings growth and total return to shareholders. Consensus forecasts for long-term earnings growth and debt to capital ratios were also taken into consideration.

The magazine assigned a composite score and an overall rank within its industry, and picked a best-managed company from each of the 26 industries based on financial performance, as well as leadership, innovation and execution.

The best-managed company within the banking industry was Bank of America, according to the ranking. While a 15.8 percent five-year return earned it spot No. 242 out of the 400 companies and fifth out of 18 bankers, the magazine noted that BoA "earns the most per quarter and is first in deposits, credit and debit card transactions, small business banking, Internet banking and, with the recent acquisition of US Trust from Charles Schwab, private banking as well."

BoA, "once a scrappy North Carolina regional, replaced Citigroup as the nation's most profitable bank," Forbes added. "Kenneth Lewis, BofA's chief, wasn't the architect of the bank's ascent. His predecessor, Hugh McColl, spent the 1990s buying everything in sight. But it was Lewis who had to make those purchases work.

"Since taking over in 2001 he's made some big purchases of his own -- Fleet and MBNA -- for which he was roundly criticized. The critics underestimated Lewis."

Finally, analysts expect the Charlotte-based lender's earnings to rise 9% a year for the next five years, and for Lewis to grow the mortgage business, the Forbes said.

Hudson City Bancorp was a newcomer on the list but its five-year return of 30.7 percent was the highest in the banking sector and the 72nd-largest out of all industries, Forbes reported.

Compass Bancshares, with 19.2 percent five-year return had the second-highest in the banking sector, followed by IndyMac Bancorp, US Bancorp, the previously mentioned BoA, Colonial BancGroup, Wachovia, Commerce Bancorp, KeyCorp, Wells Fargo, BOK Financial, and Regions Financial. Those with under 13 percent in five-year returns included JP Morgan Chase, M&T Bank, Marshall & Ilsley, PNC Financial Services, Synovus Financial and Zions Bancorp.

M&T Bancorp and Synovus Financial, however, were amongst the 29 companies on the honor roll for appearing on the list each year since its inception in 1999, according to Forbes.

Berkshire Hathaway was named the best-managed company in the diversified financials industry. Berkshire, which is led by Warren Buffett and holds 21st Mortgage under its umbrella of companies, had a 9.3 percent five year return that earned 327th place on the ranking.

"The Securities & Exchange Commission and the Department of Justice are investigating the use of finite reinsurance contracts by the entire insurance industry and, surprisingly, Berkshire Hathaway has been pulled into the fray despite the company's squeaky-clean reputation," Forbes wrote.'

"Any other company would find itself bogged down under the strain of all the legal news," the magazine added, noting that Berkshire's third-quarter report for 2006 included five pages to tell the woes.

But Wall Street trusts Buffett. Berkshire shares trade at a recent $113,500."

BlackRock had a 30.0 percent five year return, placing 82nd overall and third amongst all mortgage-related entities. Other diversified financials companies involved in the mortgage industry included Bear Stearns, Goldman Sachs Group, Merrill Lynch, Morgan Stanley, Principal Financial, and Charles Schwab.

But the top mortgage-related company to make Forbes list was Hovnanian Enterprises.

A five-year return of 38.9 percent landed the parent of K. Hovnanian American Mortgage LLC at No. 39, the magazine said.

Meritage Homes took the silver medal, with a 32.7 percent return snagging spot No. 63. Pulte Homes' was the only other mortgage-related company in the construction sector, with a 28.1 percent return earning 95th place overall.

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

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