Knight CEO: Going After Reverse Market Share Following Bank Exits

Urban Financial is poised to take over some of the reverse mortgage market share recently vacated by Bank of America and Wells Fargo, said Tom Joyce, Chairman and CEO of Knight Capital Group (NYSE: KCG) in a recent Barclays Capital Global Financial Services Conference.

Throughout the conference, Joyce seemed positive about Knight’s position in the market, saying that they “maintained and even grew market-making revenues in the phase of worsening market conditions.”

Knight entered the reverse mortgage business with the acquisition of Urban Financial in July 2010, and Joyce says the subsidiary has solidified its “position as a leading provider of reverse mortgages and issuer of HMBSs in a growing market.”

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“In the first half of the year, Urban ranked fourth in wholesale and retail reverse mortgage origination. Over the same period, Wells Fargo and Bank of America—which separately announced plans to exit the business—ranked first and second with a combined 40% market share. We are now executing our plan to gain some of that suddenly available market share,” said Joyce in the conference.

Urban began securitizing reverse mortgages in late March, and in the first half of the year securitized more than $500 million of HMBSs.

“Now considering the industry dynamics, I expect Urban share of overall origination and issuance should rise,” said Joyce.

Generally speaking, when looking at Knight’s financial results for the first half of 2011, the group maintained revenue momentum despite worse market conditions compared to the first half of 2010, according to Joyce.

“In closing, we have an incredibly strong core in market making and trading. We’ve demonstrated an ability to gain market share against an array of competitors, including larger, better capitalized firms,” he said. “At present, we are working in better positioning the Firm for growth in improving financial results.”

Written by Alyssa Gerace

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