Goldman Sachs not keen on buying mortgage lenders
Tue Sep 12, 2006 2:48 PM ET
By Joseph A. Giannone
NEW YORK, Sept 12 (Reuters) - Goldman Sachs Group Inc. <GS.N> has considered acquiring a mortgage lender, but so far has held off because it is not sure the timing is right, Chief Financial Officer David Viniar said on Tuesday.
Goldman, which posted strong fiscal third-quarter earnings earlier Tuesday, isn't convinced it wants to acquire an origination business this late in the current mortgage cycle. The firm, which focuses almost exclusively on corporations and institutional clients, also isn't sure it wants to take on a consumer business.
"So far, all our valuations have been that the negatives outweigh the positives," Viniar told analysts on a conference call. "We will never say never. We will continue to evaluate the origination business."
Goldman's stance comes as a number of Wall Street firms expand into the mortgage business.
Lehman Brothers <LEH.N> and Bear Stearns <BSC.N> snapped up a number of mortgage lenders in recent years to build vertically integrated mortgage-backed securities businesses. The firms say they can enjoy wider margins and gain better insight by controlling the whole process from top to bottom: underwriting, packaging, securitizing and trading.
Merrill Lynch <MER.N> earlier this month agreed to buy First Franklin Financial, a subprime mortgage unit of National City Corp. <NCC.N>, for $1.3 billion. Morgan Stanley last month said it would buy Saxon Capital Inc. <SAX.N> for $706 million.
Both deals, though, have raised questions from analysts who observe the mortgage business has slowed recently after a decade of rampant growth. Data from the past few months indicate that the U.S. housing market has stalled while rising interest rates could further dampen demand for home loans.
"Not that anyone else has made a bad decision. For them it was probably the right decision," Viniar added. "For us, right now, it has not been the right decision, but we will keep looking." |
