Mortgages become bright spot in big banks’ earnings report

by Rachel Norvell15 Apr 2015
Some of the nation’s biggest banks have received a lift from mortgage lending during the first quarter after sharply cutting back on production over the last few years.

JPMorgan Chase not only reported earnings of $5.9 billion but it also saw a spike in net income from mortgage banking during the first quarter. The company’s mortgage banking income rose to $326 million from $132 million in the first quarter of 2014.

JPMorgan’s mortgage banking net revenue was $1.7 billion, an increase of $151 million compared to the previous year, driven by lower mortgage servicing rights risk management losses, partially offset by lower servicing revenue, according to its earnings report.

One of the main drivers of the increase was a 45% year-over-year increase in mortgage originations. According to Chase, its’ mortgage originations rose from $17 million in 2014’s first quarter to $24.7 billion in 2015’s first quarter, which was also a 7% increase over 2014’s fourth quarter, which saw mortgage originations of $23 billion.

JPMorgan is the second biggest mortgage lender with 7% of 2014 loans, according to Inside Mortgage Finance. The bank announced in February that it had reduced its mortgage staffing in 2014 by 12,000 people. Additionally, JPMorgan’s annual mortgage business expenses have declined by $2.3 billion, or 30%.

Wells Fargo, the nation’s largest mortgage lender, also saw a bump in mortgage profits during the first quarter, but a drop in overall quarterly profit for the first time in five years.  The bank reported a net income of $5.8 billion during the first quarter compared to $5.9 billion in the prior year.
The bank's net interest margin fell to 2.95% in the first quarter ended March 31 from 3.2% a year earlier.

Wells Fargo mortgage banking revenue rose 2.4% to $1.55 billion after four quarters of decline, thanks to a spike in refinancing, according to Chairman and CEO John Stumpf in the bank’s earnings report.

Wells Fargo share of mortgages in 2014 was 14%, according to Inside Mortgage Finance. In the first quarter of 2014, the company's mortgage banking revenue fell by nearly half from a year earlier to $1.5 billion, about 7% of total revenue.

Citigroup and Bank of America plan to announce their first quarter earnings later this week.


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