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When we reported Wells Fargo's Q1 earnings back in January, we drew readers' attention to one specific line of business, the one we have repeatedly dubbed the bank's "bread and butter", namely mortgage lending, and which as we then reported was "the biggest alarm" because "as a result of rising rates, Wells' residential mortgage applications and pipelines both tumbled, sliding just shy of the post-crisis lows recorded in late 2013."
Well, unfortunately for Wells - which until recently was the largest US mortgage lender - despite the sharp drop in yields in Q1 which many had expected would boost mortgage lending or at least refi activity for the bank that was until recently America's largest mortgage lender, the decline in mortgage activity has continued, because buried deep in its presentation accompanying otherwise unremarkable Q1 results (modest revenue and EPS best), Wells just reported that its 'bread and butter' is once again missing, and in Q1 2019 the amount of all-important Wells Fargo Mortgage originations shrank again, dropping to just $33 billion, down $5 billion sequentially, and the lowest level since the financial crisis. Putting this number in context, just six years ago, when the US housing market was actually solid, Wells was originating 4 times as many mortgages, or about $120 billion.
News - Bank - Mortgage - Platform - Mortgage
That said, there was finally some good news regarding the bank's mortgage platform, where mortgage applications and the applications pipeline both jumped notably, with the former rising to $64 billion from $48 billion, and the latter printing at $32 billion, the highest since Q2 2017, arguably driven by the recent drop in interest rates.
And since this number lags the mortgage applications, we expect it to continue posting fresh post-crisis lows in the coming quarter especially if rates resume their rise.
Headline - Numbers - Recap
Going back to the headline numbers, here is a recap of...
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