The ratings agency particularly took note of the decline—which it called an improvement—in the market share of refinance mortgage originations (and the corresponding increase in purchase volume).
“Reflecting the strength of the housing market, Wells Fargo released $500 million in reserves, compared to $200 million last quarter. In line with the industry, reserve releases have generally been on a declining trend since 1Q11 for the company. Wells Fargo disclosed that absent a material deterioration in the economy, the company expects further reserve releases,” the Fitch report said.
Fitch also pointed to the quarterly net charge-offs at the bank of just 58 basis points. It added this is due to better consumer credit quality, particularly with residential mortgage and home equity loan performance. But it believes that charge-offs at this level for Wells Fargo “are not sustainable, with historical losses more around the 100 basis point range.”