Mortgage Profit Slide Hurts JPM, Wells' Earnings

by devteam July 15th, 2015 | Share

A decline in mortgage refinancing wasrnblamed in part for the second consecutive decline in quarterly profits postedrnby Wells Fargo & Co.  The biggestrnU.S. home lender reported second quarter net income of $5.72 billion comparedrnto $5.73 billion in the second quarter of 2014. rnPer share profit increased from $1.01 to $1.03 due to changes in thernnumber of outstanding shares.</p

JP Morgan Chase, on the other hand, reported an increase of 5.2 percent inrnits net income which was 6.3 billion in the second quarter compared to 6.0rnbillion a year earlier.  The net income fromrnits mortgage banking business, $584 million, represented a decrease of 20rnpercent.  Mortgage revenue dropped 21rnpercent to $1.8 billion in the quarter due to lower servicing revenue.</p

Bloomberg said that rising interestrnrates have eroded Well Fargo’s market position from its origination of 28rnpercent of U.S. home loans three years ago to 15 percent in the first quarterrnof 2015.  Second quarter revenue fromrnmortgage banking was $1.71 billion, down slightly from a year earlier even asrnoriginations rose to $62 billion from $47 billion in the second quarter of 2014rnand $49 billion in the first quarter of 2015. rnApplications pending loan closings declined by $6 billion to $38 billionrnfrom the end of Q1 to the end of Q2.</p

The bank set aside $300 million to cover credit losses in the secondrnquarter, up 38.2 percent from a year earlier.</p

JPMorgan Chase’s net income rose from $5.98 billion in the second quarter ofrn2014 to $6.29 billion, or $1.54 a share, compared to $1.46.  Chase credited its increased profitability torncost cutting done to compensate for falling income in two of its largestrnbusinesses – commercial banking and asset management.</p

Jamie Dimon, Chairman and CEO of JPMorgan Chase said in a press release, “Wernare focused on executing on our commitments and we’ve made good progress thisrnquarter, including meeting regulatory requirements, reducing non-operatingrndeposits, and adding to our capital.  Wernare also on target to deliver on our expense commitments.”</p

Chase’s earnings exceeded analysts’ expectations by $.11 per share whilernWells Fargo’s $1.03 profits came in exactly where anticipated.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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