Mortgage lending was a bright spot for Wells Fargo during the second quarter, as origination volume increased 32% from the same period a year ago.
The largest U.S. home lender finished the second quarter at $62 billion of mortgage originations, which compared to the first quarter of 2015, jumped 32%. Retail made up $36 billion of production while correspondent purchases added $25 billion. Purchase loans were 54% of the total, up from 45% in the first quarter.
Mortgage banking noninterest income was $1.7 billion, up $158 million from first quarter. But during the same time frame, the company’s gain on sale fell to 1.88% from 2.06%.
John Shewsberry, Wells' chief financial officer, said lending in California, Colorado, Florida and New York was particularly strong, and home purchases made up 54% of total originations, compared with 45% in the first quarter.
"The business is good, there's plenty of credit available, margins are holding nicely and the pipeline looks good," he said. "All of that is a reflection of continued affordability. And we've had an improving jobs market which brings more people into eligibility."
The mortgage servicing segment had $514 million in net income, down from $523 million in the first quarter.
During the conference call analysts tried to get Wells Fargo chief executive John Stumpf to make a prediction about when interest rates will rise.
Stumpf instead sought to focus the discussion of his San Francisco bank's second-quarter results on its strong loan and deposit growth and seemed to take a contrarian view on where rates are headed.
"Of course we listen to what the chairwoman of the Fed [Janet Yellen] has to say about rates, but when we plan internally we don't consider rate increases as part of an ongoing justification for investing in anything," Stumpf said. "We don't know what's going to happen to rates, and if rates do increase, that's a benefit to us. But for the last five to six years, you could have said the same thing and it didn't happen."
Meanwhile, Shrewsberry said he expects Treasury rates are "going to be lower for longer than we would have thought six months ago or a year ago." He said he is managing the balance sheet to reflect that change.
Wells' net income fell slightly to $5.7 billion in the second quarter, or $1.03 a share, from a year earlier, and matched a consensus of analysts' estimates. Revenue rose 1% to $21.3 billion.
