Wells Is Surfing a Mortgage-Banking Wave

Wall Street Journal, Friday, July 13, 2012


Wells is Surfing a Mortgage-Banking Wave

“There will be plenty of waves washing over U.S. banks Friday.  First will be the wake generated by trading losses from J.P.Morgan Chase and Co.’s ‘London whale,”  leading to a charge of around $5 billion, according to CEO James Dimon.  

“Wells Fargo & Co., also reporting Friday, will catch a different sort of wave–one of continued strength in mortgage banking.”  According to this article, Wells Fargo is the largest mortgage originator:  In the first quarter of this year,  mortgage income of $2.6 billion, equaling almost 25% of non-interest income, nearly doubled the year-earlier level.  In the second quarter, mortgage income could rise a further 10%, according to Moshe Orenbuch, bank analyst at Credit Suisse, who also expects similar growth at U.S. Bancorp, reporting results next week.

The worry is, according to this article, that the refinancing wave will “peter out….But that looks to be more of a concern for next year.  For now, even with many other banking businesses beached, surf’s up for mortgage banking.”

I wonder if David Reilly, the author of this article, surfs and lives near the ocean, perhaps in California.  This article is loaded with surfing metaphors.  Surfing itself depends on good waves;  if the surf is good with steady large waves, a good surfer does well.  In banks, if the economy is rising, and mortgages profitable, it will ride a wave of profits.  If, on the other hand, a “whale” appears, whether oceanic or a rogue trader, the “wake” affects the waves and profits will “peter out.”


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