The Five Largest U.S. Commercial Banks Continue To Lose Market Share In The Mortgage Industry

The five largest U.S. banks originated residential mortgages worth less than $87 billion in Q1 2018. This marks a sharp reduction from the figure of $110 billion in the previous quarter, and is also well below the $96 billion in mortgages originated a year ago. In fact, this was one of the worst quarters on record for these banks in the last twenty years. The only instance where these banks fared worse was in Q1 2014, when the end of the mortgage refinancing wave resulted in total originations dropping to $75 billion.

The sharp decline is primarily because of the reduction in overall activity levels across the mortgage industry from an increase in interest rates – something that can be attributed to the Fed’s ongoing rate hike process. While total mortgage originations for the industry also fell to $346 billion from $361 billion a year ago, a sharper decline in origination activity for the largest banks led their market share lower to 25% from 27% in Q1 2017.

We capture the impact of changes in mortgage banking performance on the share price of the banks with the largest mortgage operations in the U.S. – Wells Fargo, U.S. Bancorp, JPMorgan Chase and Bank of America – in a series of interactive dashboards.

*Total U.S. Originations includes fresh mortgages as well as mortgage refinances as compiled by the Mortgage Bankers Association

The mortgage industry in the U.S. witnessed a sharp reduction in origination volumes since Q4 2016, as a series of interest rate hikes by the Fed weighed on mortgage refinancing activity even as an increase in mortgage rates hurt the number of fresh mortgage applications. This led to total mortgage originations falling from $561 billion in Q3 2016 to just $346 billion in Q1 2018. There was a notable uptick in mortgage activity over Q2-Q3 2017, though, as a small reduction in long-term mortgage rates helped boost demand over this period.

Wells Fargo has remained the largest mortgage originator in the country since before the economic downturn. While the bank was always focused on the mortgage business, it tightened its grip in the industry after the recession thanks to its acquisition of Wachovia – originating one in every four mortgages in the country in early 2010. Although weak conditions in the mortgage space dragged down Wells Fargo’s market share to a low of 11% in Q4 2015, the bank’s market share has largely remained around 12.5% over recent quarters.

That said, the combined market share of these five banks has fallen drastically from over 50% in 2011 to around 25% now. This was primarily due to a sizable reduction in mortgage operations by Bank of America and Citigroup to curtail losses they incurred in the wake of the recession. In fact, Bank of America’s mortgage banking division has shrunk to an insignificant part of its business model – leading to a decision by its management to no longer report mortgage banking revenues separately starting in Q1 2018.

Details about how changes to Mortgage Banking performance affect the share price of these banks can be found in our interactive model for Wells Fargo | U.S. Bancorp | JPMorgan Chase | Bank of America

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs
For CFOs and Finance Teams | Product, R&D, and Marketing Teams
More Trefis Research
Like our charts? Explore example interactive dashboards and create your own