Mortgage Profit Slide Hurts JPM, Wells' Earnings

A decline in mortgage refinancing was blamed in part for the second consecutive decline in quarterly profits posted by Wells Fargo & Co.  The biggest U.S. home lender reported second quarter net income of $5.72 billion compared to $5.73 billion in the second quarter of 2014.  Per share profit increased from $1.01 to $1.03 due to changes in the number of outstanding shares.

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

Bloomberg said that rising interest rates have eroded Well Fargo's market position from its origination of 28 percent of U.S. home loans three years ago to 15 percent in the first quarter of 2015.  Second quarter revenue from mortgage banking was $1.71 billion, down slightly from a year earlier even as originations rose to $62 billion from $47 billion in the second quarter of 2014 and $49 billion in the first quarter of 2015.  Applications pending loan closings declined by $6 billion to $38 billion from the end of Q1 to the end of Q2.

The bank set aside $300 million to cover credit losses in the second quarter, up 38.2 percent from a year earlier.

JPMorgan Chase's net income rose from $5.98 billion in the second quarter of 2014 to $6.29 billion, or $1.54 a share, compared to $1.46.  Chase credited its increased profitability to cost cutting done to compensate for falling income in two of its largest businesses - commercial banking and asset management.

Jamie Dimon, Chairman and CEO of JPMorgan Chase said in a press release, "We are focused on executing on our commitments and we've made good progress this quarter, including meeting regulatory requirements, reducing non-operating deposits, and adding to our capital.  We are also on target to deliver on our expense commitments."

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