Company-wide earnings deteriorated at Wells Fargo & Co. But it boosted quarterly home lending volume, and the current quarter is poised for further escalation. Correspondent share tumbled.
From April 1 through June 30, income before income-tax expense came to $7.1 billion, the San Francisco-based bank-holding company revealed in its second-quarter earnings report.
Wells Fargo’s income descended from the same three-month period last year, when it earned $8.1 billion. But results were better than the previous three-month period, when income was $6.7 billion.
Mortgage banking income was $0.770 billion — including $0.406 billion in servicing income and $0.364 billion from production. Earnings retreated from $1.148 billion in the second-quarter 2017 and $0.934 billion in the first-quarter 2018.
The most-recent quarter saw $50 billion in single-family first-mortgage originations. Business jumped from $43 billion three months earlier. But mortgage production receded from a year earlier, when Wells closed $56 billion.
Correspondent share was 56 percent, sinking from 63 percent the preceding period. Wells noted that there are lower production margins in the correspondent channel.
With the rising retail share, retail volume jumped to $21 billion from just $16 billion in the first quarter.
The increase left Wells with slightly more production than the $20.5 billion originated in the first quarter by No. 1 retail lender Quicken Loans Inc. — though Quicken, which has yet to report second-quarter metrics, most recently likely also saw an increase.
Refinance share sank to 25 percent from the first-quarter’s
35 percent.
Full first-half 2018 home lending came to $93 billion.
Originations during the third quarter are likely to increase further given that applications rose to $67 billion in the second quarter from $43 billion the prior period, and the application pipeline grew to $26 billion from $24 billion.
The residential servicing portfolio ended last month at $1.530 trillion, less than $1.538 trillion at the end of March and $1.532 trillion on the same date last year. The latest number consisted of $1.190 trillion in third-party servicing and $0.340 billion in owned loans serviced.
An additional $0.004 trillion was subserviced by Wells.
Wells Fargo’s balance sheet included $319.543 billion in residential loans, off from $320.578 billion as of March 31 and up from $319.313 billion as of mid-2017. Most recently the total was comprised of $283.001 billion in first mortgages and $36.542 billion in junior liens.
The commercial mortgage servicing portfolio expanded to $642 billion from $635 billion and was just $605 billion on June 30, 2018. The latest total included $518 billion in loans serviced for other and $124 billion in owned loans.
Another $10 billion in commercial mortgages were subserviced by Wells.
Commercial real estate assets came to $146.901 billion and included $123.964 billion in commercial mortgages and $22.937 billion in construction loans. The CRE total was reduced from $149.425 billion three months prior and $155.614 billion a year prior.
As of mid-2018, company-wide staffing was 264,500. That came to 1,200 fewer employees that at the end of the first quarter. Headcount has been cut by 6,100 people over the past year.
The branch count was lowered to 8,050 locations from 8,200 in the last report.
