In what was the biggest upset in the league tables for any fixed-income product last year, previous laggards UBS Warburg and Goldman Sachs leapt to the top of the charts.

It was a year when few top-ranked banks relinquished their crowns, making the mortgage-backed securities market shakeup a vivid exception as the pair of formerly second-tier banks leaped over longtime rulers to suddenly dominate the burgeoning sector.

UBS Warburg was crowned ruler of the global MBS market, up from seventh place last year, and its proceeds expanded astonishingly-the shop underwrote $86.8 billion in deals in 2001, compared with $14.3 billion in 2000, more than quintupling its fortunes, according to Thomson Financial.

Right behind was Goldman Sachs, a firm not usually renowned for its structured finance might, with $82.5 billion in global deals underwritten compared with a mere $12.7 billion in 2000, for a similar increase. The two new rulers knocked the stuffing out of the banks one typically finds in the higher tiers of MBS league rankings Merrill Lynch & Co., a traditional top-four bank, fell to tenth place last year; Lehman Brothers, the top firm for much of the late 1990s, was at sixth place, and Morgan Stanley fell out of the top ten altogether, netting only a 2.4% market share.

Ramesh Singh, managing director and head of MBS and asset-backed securities for UBS, credits the bank's success to its acquisition of PaineWebber's mortgage trading operation in 1999. "UBS was instantly able to acquire a team that had a very credible presence in the mortgage market," he said. "And we (from Painewebber) got a lot more balance sheet than we used to have and we deployed it effectively in the market resulting in the number one underwriting ranking."

To be sure, the success of firms like UBS is in part a case of a rising tide substantially lifting all boats. The global MBS market was up about 190% over 2000, with $638.4 billion in new deals issued compared with $219.5 billion in the previous year. A huge mortgage refinancing wave driven by Federal Reserve rate decreases, an explosion of debt issuance due in part to a drying up of the equities market, and a still-strong real estate market that has not seemed immune to recession, fueled the boom.

In some cases, it appears to be a case of some firms cutting their losses and not committing as many resources to low-profit areas like MBS. Yet other bankers said that the success of players like Goldman comes down in part to aggressiveness and the exploitation of weaknesses in rivals. A number of messy mergers and the bailouts of longtime also-rans like Prudential Securities also helped UBS and Goldman gain ground in the market.

"Our rise in the rankings underscores our increased commitment to the business. We have strengthened our franchise in virtually all areas," said Jonathan Sobel, managing director and head of the mortgage department at Goldman Sachs. "We are optimistic about the market in 2002."

Case in point: Goldman late last year co-led a lucrative $7.1 billion home equity loan deal from EquiCredit, a lending unit of Bank of America, which insiders said perturbed structured finance pros at Banc of America Securities. "No one knows why Goldman was invited to co-lead the transaction, but it certainly helped their standings," one source said. Bank of America said last August it was exiting the subprime mortgage business entirely, and some bankers said Goldman was brought aboard to ensure that the securitization of its subprime portfolio had a smooth reception.

Yet some mortgage pros said that the 2001 league tables could be an exception, an example of a market in the process of a long-winded changing of the guards. In the future, shops like UBS and Goldman will be hard pressed to withstand such competition as JPMorgan and Citigroup, if the latter banks decide to really make an effort in mortgage securities. Another factor is the likely compression of the MBS market this year if deals start drying up, competition could heat up.

One longtime mortgage banker said that the best MBS underwriters were not entirely discernable through league-table performance, as he commended fourth-ranked Credit Suisse First Boston as putting an impressive outing despite having fallen from being top-ranked bank of 2000. "They've overcome merger difficulties and a generic lack of focus and are really showing the value of their franchise, whether it's due to John Mack's new management or the people they have in banking and trading," he said.

By contrast, the pro said he was shocked that JPMorgan barely cracked the top ten, as the ninth-ranked shop underwrote $22.6 billion in deals to net only a 3.6% market share. "I'm really surprised that J.P. Morgan Chase has not been able to compound their franchise strength-they have excellent people at every station," he said. "It's not a function of lack of talent or capital. They should have been moving up the fixed-income ladder, but now I guess all you can say is that they're not worse off than they were a year ago."

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