JPMorgan and Wells Fargo Report Lower Home Lending Revenue in the Third Quarter

JPMorgan Chase and Wells Fargo both reported lower mortgage revenue for the third quarter on Tuesday, Oct. 13, even as each bank's overall profit rose from a year earlier. The figures come from JPMorgan and Wells Fargo earnings releases filed with the Securities and Exchange Commission.

Why this matters: The two banks are among the largest mortgage lenders and servicers that report publicly each quarter. Their results give an early look at how lenders fared in a quarter when mortgage rates stayed above 7%.

Chart: Home Lending revenue in millions of dollars, from each bank's Oct. 13 earnings release. Chart by mortgage.news using only the figures cited in this article.

JPMorgan: lower production revenue

JPMorgan's Home Lending net revenue was $1.217 billion in the quarter ended Sept. 30, down 3% from $1.260 billion a year earlier and down 5% from $1.285 billion in the second quarter. The bank said the decline was driven by lower production revenue, partially offset by higher net interest income.

According to HousingWire, which drew on the bank's financial supplement, JPMorgan's mortgage origination volume was $16 billion, down 7% from the second quarter and up 15% from a year earlier. Retail originations fell 18% from the prior quarter to $8.7 billion while correspondent originations rose 11% to $7.3 billion. HousingWire reported the third-party servicing portfolio at $651.9 billion.

JPMorgan reported total net income of $15.3 billion. Chief Executive Jamie Dimon said rising interest rates, sticky inflation and large fiscal deficits are among forces that "continue to shift under the surface."

Wells Fargo: servicing and balances shrink

Wells Fargo's Home Lending revenue was $743 million, down 2% from $762 million in the second quarter and 15% from $870 million a year earlier. The bank attributed the annual drop to lower mortgage servicing income and lower net interest income on lower loan balances. Its release also cited lower mortgage banking income among items that held back companywide noninterest income.

Wells Fargo's third-quarter earnings supplement shows mortgage originations of $7.8 billion in the quarter, down 13% from $9.0 billion in the second quarter and up 11% from $7.0 billion a year earlier. Third-party mortgage loans serviced fell to $343.9 billion at the end of September from $361.4 billion at the end of June and $433.8 billion a year earlier. HousingWire's report said those figures were not disclosed, but they appear on page 11 of the supplement.

Overall, Wells Fargo earned $6.0 billion, or $1.87 a share, up 13% per share from a year earlier. Chief Executive Charlie Scharf said customers are doing well but that higher interest rates, higher oil prices and persistent inflation create risks.

Why the two moved differently

JPMorgan still competes for retail and correspondent volume, so its mortgage revenue tracks origination margins and volume. Wells Fargo's smaller Home Lending line depends more on servicing income and the balances it holds, which are falling as loans pay off. Neither bank tied its results to a forecast for mortgage rates.

What it means

For borrowers, bank earnings do not set mortgage rates. They do show that big banks are earning less from mortgages, which can affect how hard they compete on price and service. Bank of America and Morgan Stanley were scheduled to report on Wednesday, Oct. 14, according to CNBC.

The takeaway: Mortgage revenue fell at both banks from a year earlier while rates stayed high. Neither release breaks out a separate mortgage profit figure, so the results show lower revenue, not whether the mortgage units made or lost money.