Largest U.S. Banks Unable To Make The Most Of Uptick In Q2 Mortgage Origination Activity

by Trefis Team
Wells Fargo & Co.
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The 5 largest U.S. banks originated residential mortgages worth almost $112 billion in Q2 2017. This is a notable improvement from a figure of just $96 billion in the previous quarter, but is well below the figure of $129 billion a year ago. While the mortgage industry as a whole continues to witness depressed activity levels, these banks have seen their market share fall for each of the last two quarters, from 30% in Q4 2016 to just 24% in Q2 2017.

*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 $361 billion in Q1 2017. But a sharp increase in fresh mortgages helped the figure recover to $463 billion in Q2 2017. The fact that the market share of the largest U.S. banks fell  despite the sequential improvement in combined origination volume can be attributed to a sizable reduction in fresh mortgage applications for these banks.

Wells Fargo has retained its position as the largest mortgage originator in the country from before the economic downturn. In fact, the bank 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 have dragged down Wells Fargo’s market share to just 11% for Q4 2015, the bank’s market share has remained around 12%-12.5% since early 2016

You can see how changes to Wells Fargo’s mortgage origination volumes affect our price estimate for the bank by modifying the chart below.

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