First-quarter mortgage banking results at Wells Fargo and JPMorgan Chase could be an early sign of an improving industry.
The home-loan origination total was $33 billion at Wells and $15 billion at JPMorgan Chase. While this marked a 13% consecutive-quarter drop for both companies, it compares favorably to consecutive-quarter declines of almost 19% at Wells and more than 25% at JPMorgan Chase a year ago.
Year-to-year first-quarter originations are down almost 18% at JPMorgan Chase, and more than 23% at Wells Fargo.
In addition, profitability measures at both companies also look a little better than they did the previous quarter, and JPMorgan Chase’s results also show improvement year-to-year.
Mortgage banking income at Wells was $708 million, up almost 52% from $467 million in the fourth quarter of last year, but still down more than 24% from $934 million a year ago.
JPMorgan Chase’s net production revenue was $200 million, up from a $28 million loss in the previous quarter and from $95 million 12 months earlier.
The two companies’ origination performance is in line with industry consensus estimates, but their profitability measures are influenced in part by some company-specific factors, according to a Keefe, Bruyette Woods report.
Wells books gain-on-sale income when the loan is sold rather than using the more common practice of recording it at rate lock; and the gain at JPMorgan Chase, like the loss it took the previous quarter, could be a one-time event.
“So net/net, while mortgage banking trends appear positive, they might end up being stronger than broader industry trends,” the analysts said in the report.
Overall, Wells Fargo’s net income for the first quarter totaled nearly $6 billion, down slightly from more than $7 billion the previous quarter and almost $9 billion during the same period a year ago. JPMorgan Chase set a record by generating more than $9 billion in total net income in the first quarter.