How The Scores Were DeterminedEach company is ranked against the others for each of the time periods on its return on equity. Each company then is ranked against the others on EPS growth. The two scores are added together to get a final score. The lower the score, the higher the total rank. Tables:
- Overall
One-Year |Three-Year |Five Year - Commercial Banks
One-Year | Three-Year |Five-Year - Thrifts
One-Year |Three-Year |Five-Year - Broker-Dealers
One-Year |Three-Year |Five-Year - Specialty Lenders
One-Year |Three-Year |Five-Year
Profiles:
This year’s rankings of mid-size banking companies shows just how fickle earnings performance can be. Four of the five top performers have very iffy outlooks: No. 1-ranked Silicon Valley Bancshares of Santa Clara, CA; No. 3-ranked Southwest Securities Group of Dallas; No. 4-ranked Legg Mason of Baltimore, and No. 5-ranked Corus Bankshares of Chicago.That leaves Metris Companies, the credit card issuer based in Minnetonka, MN, as the real winner. Metris has shown consistency in its excellence. It places No. 2 on our one-year ranking, and tops the five-year listing, and comes out No. 4 on the three-year. And its outlook is excellent.
Silicon Valley Bancshares, in contrast, had been the wunderkind of banking during the glorious days of the high-tech bubble. But now, with the bubble pricked, Silicon Valley’s earnings have dropped sharply, and its leaders have bailed out.
The companies included in the mid-size group represent the second hundred largest banks in the United States. Their assets range from $2.02 billion (Alliance Bancorp, Hinsdale, IL) to $6.24 billion (Whitney Holding Corp., New Orleans).
There are three sets of rankings, the first is based on profit performance in fiscal 2000 (page 43), the second for the three fiscal years 1998-2000 (page 46), and the third for the five-year, 1996-2000 period (this page). The rankings are based on return on equity and growth in per-share earnings. The raw data is supplied by SNL Securities. (See box below for details about how the rankings were calculated.)
Tables showing the breakdown by industry are on our Web page at www.us-banker.com.
Although commercial banks are rare among the top five on each of the overall lists, some in the top quartile exhibit strong and continuing staying power as they ply their niches artfully.
In contrast, while the brokerage business has been booming over the past five years or so, it has come under difficult times as trading volume has fallen and as fewer companies go public. The problems began last March, of course, when the technology-heavy Nasdaq market began its steep plunge and as the bear market moved to stocks of the more the traditional economy.
As a result, brokerages whose fiscal years ended early in the calendar year ranked higher on this year’s list than they would have if their fiscal years had ended Dec. 31.
Dallas-based Southwest Securities Group, whose fiscal year ended June 30, 2000, produced a splendid fiscal 2000, as well as over the past five years. In addition to ranking third on both the one-year and three-year time periods, it ranked second on the five years listing.
But like most brokerages, its earningsand stock pricehave plunged since last year’s first quarter. The decline has been exaggerated because Southwest’s results were inflated in fiscal 2000 as a result of the sale of Knight Trading Group, which gave Southwest a $72.9 million pre-tax gain. That boosted net income to $94 million from the $48.2 million it would have been if the special items were excluded. Southwest Securities’ primary business is that of a clearing firm for other brokers.
But Southwest is broadening its scope and early last year purchased First Savings Bank of Arlington, TX, a federal savings bank that contributed more than 11% of the company’s overall revenues last year.
Fifth-ranked Corus Bankshares also is not an ordinary banking company, and its high ranking also is a bit of a fluke. Its performance was bolstered last year by a non-recurring item, primarily the sale of its student loan business, which produced a $22 million pre-tax gain.
Among the robust companies in the first quartile but which did not make the top five or 10, is the $2.5 billion-asset East West Bancorp. Based in San Marino, CA. Its East West Bank has offices in Los Angeles, Orange, San Francisco and Santa Clara counties.
Ranking 13th on the one-year tables, the bank operates just as its name describes. Some 90% of its retail customers are Chinese Americans, while 60% of its commercial loans are to the non-Chinese population. But a good part of that business is to finance trade with Asia.
"A business down the block looking to do trading with Asia will very naturally come to us," says CEO Dominic Ng, who moved to the United States from Hong Kong in 1977. Ng, now 41, moved to the U.S. to attend the University of Houston. His first job was in the Houston office of Deloitte & Touche, where he worked 10 years. He then joined one of his Asian clients, becoming CEO of Seyen Investment Inc., the U.S. investment arm of a large, Indonesian-based conglomerate. At Seyen, Ng acquired East West Bank in 1992, and became its CEO at the age of 33. The bank had about $800 million in assets at the time. In 1998, Ng raised $238 million and bought out his partners. He took the bank public in 1999.
Aside from export loans, the bank provides a full-range of services aimed at people who deal across the Pacific. They include tax advice for Americans doing business in Asia and helping well-to-do Asians invest money in the U.S.
"Our strategic vision, which we pride ourselves on, is good, but it would it work in Wyoming or Idaho? Definitely not," says Ng. Although the bank is small compared with the nation’s biggest, it is the third largest in Los Angeles. "There are no big banks here, they’ve all gone," Ng says.
