It's no longer any secret that the biggest banks are being forced to acknowledge that the mortgage-lending mini-boom that gave Wells Fargo (WFC -0.79%) and JPMorgan Chase (JPM -0.82%) such lifts in revenue last year is fading fast. Though neither bank turned in lousy first-quarter earnings reports, JPMorgan CEO Jamie Dimon noted that loan growth was stagnating throughout the industry. Wells reported a dip in refinancing, which had helped stoke profits last year, of 65% of new mortgages, from 76% in the year-ago period.
All big banks are feeling the pinch
Bank of America (BAC -1.71%) saw its marginal mortgage business jump, thanks to refinancing, by 57% year over year, but the news from the mortgage front may cause that impetus to fizzle. While earnings at U.S. Bancorp (USB -0.06%) were up from the previous year, they were flat from the previous quarter, and Fitch noted that cost savings might not continue to buoy revenue as mortgage activity slows.
Powerhouse regional bank PNC Financial (PNC 0.80%) has also admitted to an increasingly lethargic mortgage business, recently warning that loan growth will rise by only around 5% this year, and that commercial and industrial lending will lead the way. PNC continues to cut expenses, such as staff positions and marketing costs as well.
B of A and Wells fight back
Even as Bank of America continues to slim itself down via Project New BAC, it is looking for ways to buck the shrinking mortgage business trend, hoping to keep increasing its production over 50% year over year. That's a tall order, but the bank is using its new retail branch structure to help make that goal a reality.
As Bank of America opens more of its more modern branch locations, it is looking to increase mortgage lending at those sites. CEO Brian Moynihan has noted that the bank hired 1,000 new mortgage bankers in the first quarter and has beefed up its mortgage fulfillment department by another 4,000. Moynihan says that B of A will hire more bankers as needed, as well, to keep the mortgage origination wheels turning.
A decrease in the home loan business isn't causing Wells to give up, either. This bank didn't get to be tops in the industry by standing still, and it isn't going to start now. The company has just broken ground on a 265,000 square-foot expansion project at its West Des Moines, Iowa, lending facility, at a cost of $100 million.
That's not all. Wells plans additional boosts to its mortgage facilities in Tempe, Arizona, and has hired more than 5,000 new employees in the first quarter of this year. Apparently, Wells expects to grow revenues by pushing new loans, and picking up the slack that JPMorgan's mortgage department staff cuts will engender.
Can Bank of America and Wells Fargo beat the mortgage-slump prediction by engaging in a mortgage-banking blitz? Time will tell, but they surely deserve credit for trying.