The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Bank Results Season: That thing called a mortgage, it still exists

With mortgage demand all but dead, and incentives on Jumbo mortgages going away soon, this bank did well to get $64 bln more in mortgage originations still down 25% from a year ago’s $84 bln. Add to that lower loan losses by $1 bln who are going around like everybody’s favorite party girl and you have a rocking $3.9 bln profit for the West Coast based Wells Fargo, the owner of Wachovia in the east’s richest states. with Goldman Sachs turning down their prediction for US economic activity to 1.5% and 2.5 % in Q2 and Q3 respectively and larger GSE settlements and provisions looming for everyone after BofA,  it yet seems a very short lease of life for the stagecoach to run through its strengths and encamp on the gold trail again.

Total revenues fell just 5% to $20.4 bln and provisions for GSEs in both the quarters fell under a billion to a total of $713 mln. Operating expenses thus sank lower by a nominal $250 mln. even a Citi with a much smaller mortgage book provides $1 bln for GSE settlements (faulty documents) while BofA provides $20 bln. Wells Fargo’s $214 bln Wachovia portfolio however is safe according to the NY Times result report as it was more proactive during the boom. I have to check this but they did have a clause during the Wachovia purchase asking the Feds to pay up the losses upfront?

 

Wachovia headquarters - Charlotte, North Carol...

Image via Wikipedia

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