JPMorgan Chase Q2 Mortgage Earnings May Be a Forerunner


If JPMorgan Chase’s home lending results are indicative, then mortgage companies could face a significant decline in lending revenue from quarter to quarter due to competitive pressures.

“JPMorgan Chase mortgage banking results were slightly below our expectations as a whole, as strong steady volumes were overshadowed by a sharp decline in sales profits,” Boz George of Keefe, Bruyette & Woods wrote succinctly, adding: “Slightly negative” change in the bank’s mortgage servicing was in line with his expectations. “While we believe the JPMorgan Chase data is helpful, we believe Wells Fargo’s earnings tomorrow should serve as a broader indicator of industry trends.”

The company’s total mortgage fees and related income, including handling and servicing operations, was $ 548 million in the second quarter, up from $ 703 million in the prior quarter and $ 917 million in second quarter of 2020.

JPMorgan reported $ 517 million in manufacturing revenue in the first quarter, down 32% from $ 757 million in the first quarter and 30% from $ 742 million a year ago.

The decline in revenue came even though mortgage lending increased by 4% compared to the first quarter and a whopping 173% compared to the second quarter of 2020.

JPMorgan brought in $ 39.6 billion in the second quarter, up from $ 39.3 billion in the first quarter and $ 24.2 billion a year ago. The mortgage industry as a whole is expected to see decrease in volume by 4% compared to the previous quarter, according to a June forecast by the Mortgage Bankers Association.

Profit on sales fell 61 basis points from the first quarter to 131 basis points. “The retail / correspondent channel ratio at JPMorgan Chase has remained roughly the same quarter-on-quarter (from 59% / 41% to 57% / 43%, respectively), so we do not believe the channel mix has contributed much to the sales delta growth.” said George.

The bank’s correspondent channel volume in the second quarter was $ 16.9 billion, up from $ 16.3 billion in the first quarter. In the second quarter of last year, as the aftermarket reeled from the initial impact of the pandemic, Correspondent Channel raised $ 6.2 billion.

JPMorgan Chase served $ 463.9 billion as of June 30, up from $ 443.2 billion three months earlier but up from $ 482.4 billion a year ago.

The carrying amount of MSR for the quarter was 97 basis points, up from 102 basis points on March 31, but up from 64 basis points on June 30, 2020. The quarter-to-quarter decline was in line with KBW’s expectations given that rates for the 30-year fixed loan fell 20 basis points in the quarter, George said.

Nonetheless, net service revenue returned to JPMorgan Chase profitability of $ 31 million, up from a $ 54 million loss in the first quarter; In the second quarter of 2020, the bank’s net revenue from servicing the bank amounted to USD 175 million.

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