How Have Third-Party Mortgage Servicing Portfolios For The Largest U.S. Banks Changed In The Last 5 Quarters?

-5.26%
Downside
37.92
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BAC: Bank of America logo
BAC
Bank of America

The five largest U.S. banks have seen a notable reduction in their total third-party mortgage servicing portfolio over the last five quarters, as the figure has fallen from over $2.9 trillion in Q2 2015 to $2.6 trillion now – a year-on-year reduction of 9%.

CB_QA_MortgageServChange_16Q2

While the regional banking giant U.S. Bancorp stands out as the only major bank to witness an increase in its third-party mortgage servicing portfolio, the overall decline in the total figure can be attributed to two key factors: firstly, weak activity levels in the mortgage industry over recent years coupled with steady mortgage repayments have shrunk outstanding loan volumes; and secondly, the banks have been forced to reduce their focus on the mortgage servicing industry in view of stricter capital requirements and poor quality of legacy mortgages. The latter is particularly true for Bank of America, which has reduced its third-party mortgage servicing portfolio from a peak level of $1.7 trillion in 2009 to just $353 billion now – a reduction of nearly 80%.

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The chart below captures Bank of America’s third-party mortgage servicing portfolio over the years, and also includes our forecast for it. You can see how changes to this portfolio affects our price estimate for the bank by modifying this chart.

See the links below for more information about the 5 largest U.S. commercial banks:

Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment/ ask questions on the comment section
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to the full Trefis analysis for U.S. Bancorp | Wells Fargo | JPMorganBank of America | Citigroup

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