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Western Companies Best

Mercer Oliver Wyman analysis

March 6, 2007



photo of Patrick Crowley
The future is bright for Western-based financial service firms — which lead companies around the rest of the nation in shareholder performance, according to an analysis by a worldwide risk management firm.Among the top performers are mortgage lenders Wells Fargo, based in San Francisco, and Countrywide Financial of Calabasas, Calif., the report from Mercer Oliver Wyman said.

Research conducted on the risk-adjusted returns over the past five years show that financial services firms headquartered on the West Coast and in states west of the Rockies have outperformed the rest of the industry by 60% since 2002, Mercer Oliver Wyman said in a statement.

California-based institutions did especially well, outperforming the rest of the country by 90%, it said.

“Though the technology industry captures most of the attention on the West Coast, our research shows that the region is building similar leadership in financial services,” Clarence Koo, managing director and head of Mercer’s San Francisco office, said in the statement.

“As a group, western financial firms lead the U.S. in terms of risk-adjusted shareholder performance,” Koo said.

The firm attributes the strong performance to several factors, including particularly favorable regional economic growth; a focus on consumer and business banking; and strong operational management.

The top performer in the analysis was Sterling Financial of Spokane, WA. Countrywide placed fifth while Wells Fargo finished seventh.

“Similar principles underlie the success of Wells Fargo and Countrywide,” the firm said.

Those principles include “organic growth” with small acquisitions to grow distribution; consistent investment in consumer lending; understand the cyclical nature of the mortgage business; and strong culture and execution.

Countrywide has been adept at “aggressive growth of origination” and a “broad and shifting product mix to match market conditions” such as offering reverse mortgages and warehouse lending to brokers, according to the analysis.

The firm also said that the “mortgage market downturn” is likely to be a challenge for Countrywide.

Wells Fargo has had a “consistent strategy” focused on cross-selling products, a “very early focus on growing home equity lending” and the effective use of the Internet and direct mail – particularly for home equity loans – as sales tools.

“However, the west is not without challenges,” the firm said. “Western firms will wrestle with regional issues related to the housing market and subprime lending. Additionally, the attractiveness of the western markets means even high-performing western firms are take-over candidates for larger institutions from other regions.”

The future is also bright for western firms.

“Factors important to the future … in the western region include the fast-growing economies in Asia, the aging and expansion of the population and the convergence of technology and financial services” in the west, the firm predicted.

Emerging markets such as China, India and Southeast Asia could account for more than 40% of the west’s financial services growth in the next five years, Mercer said.

“California’s historical connection to the Asia-Pacific region should help western firms capitalize on the growing financial flows between Asia and the U.S., the firm said.

Patrick Crowley is a feature journalist and blogger for He is also a reporter, blogger and columnist for The Cincinnati Enquirer.
e-mail Patrick at:

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