Mortgage banking results at JPMorgan Chase and Wells Fargo were slightly weaker than expected
"While the results suggest that volumes increased on seasonality, gain-on-sale margins did not benefit," wrote analysts Bose George, Alexander Bond and Thomas McJoynt-Griffith. "These results suggest that mortgage banking likely remains under pressure."
That volume problem is likely to extend to the upcoming second quarter results for the publicly traded independent mortgage bankers that KBW covers, it said, namely Rocket Cos., UWM Holdings, PennyMac Financial Services, Rithm and Mr. Cooper.
Chase's second quarter 91-basis-point gain on sale was 41 basis points lower
"These declines were slightly surprising as we expected gain-on-sale margins to continue to trend higher as volumes increased in the second quarter versus the first," KBW said. "JPMorgan Chase may have sacrificed some margin to recapture share, but the reason for the margin decline at Wells Fargo is less clear as the mix shift to the higher-margin retail channel suggests the margin should have increased."
Wells Fargo announced
Chase reported production income of $102 million, up from $75 million in the first quarter but down from $150 million
Total volume for the most recent period was $11.2 billion, including $1.1 billion picked up when JPMorgan Chase bought First Republic.
This compared with $5.7 billion in the first quarter and $21.9 billion one year ago.
That means the quarter-to-quarter percentage gain in volume of 96% far outstripped the 36% rise in production income.
Wells Fargo's net gain on sale was $70 million in the second quarter, versus $76 million in the first quarter and $134 million in the second quarter of 2022.
Volume of $7.8 billion, nearly all of it retail, was up from $5.6 billion in the first quarter (including $1 billion from correspondent) but down from $34.1 billion one year prior. The second quarter 2022 numbers include $14.5 billion of correspondent purchases and $19.6 billion of retail production.
Net servicing income at Wells Fargo fell 26% quarter-to-quarter, to $62 million from $84 million, and 19% year-over-year from $77 million for the second quarter 2022.
Meanwhile, Chase's net servicing revenue of $172 million was a 16% increase from $148 million in the prior quarter but a 24% year-over-year decline when it earned $227 million in the second quarter of 2022.
While not doing the same deep dive on the mortgage results at Citi, KBW noted its second quarter volume was up 36% from the prior three months in formulating its read across for the nonbanks.
Citi branches produced $4.5 billion, versus $3.3 billion in the first quarter and $4.1 billion in last year's second quarter.
In a separate line in the quarterly supplement, mortgage originations from Citi's wealth management business were $2.9 billion in the second quarter, versus $1.8 billion for the previous three months and $5.3 billion for the same time last year.
