Mortgage profits lag origination gains at Wells Fargo, JPMorgan Chase

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Wells Fargo and JPMorgan Chase recorded stronger mortgage originations in the second quarter as rates fell, but profits from single-family loans were lower than a year ago due to decreased servicing revenue.

Home-loan originations during the quarter totaled $53 billion at Wells and almost $24.5 billion in JPMorgan Chase's consumer and community banking division. (JPMorgan Chase also generates another $1 billion or so of additional mortgage production outside this division each quarter).

Wells' quarterly mortgage production total marked a 6% increase year-to-year, while JPMorgan Chase's consumer and community banking total was up almost 14% from 2Q18. Both companies' volume totals were up more than 60% from 1Q19.

Mortgage banking income at Wells was $758 million in the second quarter, representing a less than 2% decline from a year ago, and an increase of more than 7% from the previous quarter. Fees and related income from mortgages at JPMorgan Chase totaled $279 million, down almost 14% from 2Q18 and nearly 30% from 1Q19.

Declines in net mortgage servicing revenue as rates fell played a role in the income reductions at both companies.

Net production revenue at JPMorgan Chase was up 280% from a year ago and more than 76% from the previous quarter at $353 million, but the company took a net loss on mortgage servicing of $74 million. The company recorded $231 million in net servicing income in 2Q18 and $196 million in 1Q19.

Wells managed to generate $277 million in net mortgage servicing income in the second quarter of this year, but this figure was down almost 32% from a year ago and nearly 24% from the first quarter.

Overall, Wells net income of $6.2 billion was up more than 19% from a year ago and more than 5% from the previous quarter. JPMorgan Chase's net income of almost $9.7 billion was up 16% from 2Q18 and more than 5% from 1Q19.

JPMorgan Chase's net income included a $768 million boost from income tax benefits related to the resolution of audits.

Wells had a one-time gain of $721 million from the sale of $1.9 billion worth of pick-a-pay credit-impaired loans. These mortgages performed poorly during the Great Recession. Wells inherited a large payment-option ARM portfolio when it acquired Wachovia Corp. in 2008.

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Earnings Bank stocks Originations Servicing Wells Fargo JPMorgan Chase