|
Four major U.S. lenders reported an average 33 percent drop in
second-quarter mortgage banking revenue on Friday, compared with
the same quarter of last year. An ongoing decline in refinancing
activity, higher funding costs, tougher competition and a
greater portion of business coming from third parties, who
generally deliver lower margins, all contributed to the slide.
Even so, executives sounded optimistic about the core operation
of lending to people who want to buy homes.
"I wouldn't throw in the towel on the mortgage business," Tim
Sloan, chief executive officer of Wells Fargo & Co, the biggest
U.S. home lender, said on Friday.
Wells's quarterly mortgage banking revenue of $1.4 billion was
down 19 percent from the year-ago period.
A variety of factors hurt results, including the sale of a
legacy portfolio of risky loans, but Wells saw improved credit
quality among borrowers, and strong demand for mortgages to
purchase new homes. The bank sees "huge opportunities" in
growing first and second mortgages, Sloan said.
JPMorgan Chase & Co, PNC Financial Services Group Inc and
Citigroup Inc also reported mortgage banking revenue declines of
33 to 41 percent last week. Bank of America Corp reports results
on Tuesday.
Starting in 2009, banks began to benefit from a surge in
mortgage refinancing, thanks to rock-bottom interest rates and
federal programs to help struggling borrowers. That activity has
been trailing off as rates have started to rise and many
borrowers who sought lower rates have already gotten fresh
loans.
It will be difficult to make up for lost refinancing volumes,
even though the market for home purchases has been improving,
analysts said.
New and existing home sales rose in May while prices reached
all-time highs, according to federal housing data and the
National Association of Realtors (NAR). Weekly mortgage
applications shot to a seven-year high at one point during the
quarter, according to data from the Mortgage Bankers
Association. NAR predicts new single-family home sales will rise
8.4 percent this year.
Those improvements in the market may continue for some time,
analysts said, since mortgage rates remain low by historical
standards and young American millennials have only recently
begun to enter the housing market. But banks' mortgage
businesses will only show improvements as comparisons with a
previous year become easier, they said.
"While we saw some pressure in the second quarter, we think
that's a low point for the year," Marty Mosby, an analyst at
Vining Sparks brokerage and asset manager, told Reuters. "We
should start to see some pickup in home purchase activity."
(Reporting by Sweta Singh in Bengaluru; Additional reporting by
Dan Freed and David Henry in New York; Editing by Lauren Tara
LaCapra and Phil Berlowitz)
[© 2017 Thomson Reuters. All rights
reserved.] Copyright 2017 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
|
