On Friday, Wells Fargo & Co. reported a surprising 23% rise in first quarter profit. However, the bank’s mortgage business has showed signs of slowing while net interest margins shrink as well.
Wells Fargo, the fourth-largest U.S. bank, has been considered the leading home lender ever since the financial crises. The bank’s recent decline in home loans may be cause for concern.
“It’s going from great to good,” explained Scott Siefers, an analyst at Sandler O’Neill. “This is a business that is simply tailing off, and it’s going to be very challenging to sustain.”
During the last quarter, Wells Fargo made $109 billion in home loans. Last year, the bank make $129 billion in the same quarter.
Chief Financial Officer Tim Sloan said “Our guess is that mortgage origination levels and revenues will continue to come down.”
He added that the bank has seen an increase in loans taken out by home buyers. He believes this will help offset a decline in refinancing.
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