Wells Fargo originations up 31%, executive excitement not

Results defy industry trends

Despite reaching and beating analyst expectations for its second-quarter earnings, Wells Fargo (WFC) executives are less than thrilled about the origination results.

 “The gain-on-sale was at the low end of the range, which is how we thought it would be on investor day. Originations were less than what we originally anticipated. We are glad the results are good, but we might have imagined a little bit more going into the year,” Wells Fargo and CEO John Stumpf said.

Originations in the second quarter increased 30.6% from $36 billion in the previous quarter to $47 billion, with gain on sale revenue up $116 million.

Applications grew from $60 billion last quarter to $72 billion, while the application pipeline came in at $30 billion at quarter end, up from $27 billion at March 31.

To Wells Fargo, originations are consistent with the Mortgage Bankers Association and other metrics, which estimate a $1 trillion mortgage market for 2014, if that.

And for the mega bank, mortgage banking is higher than the first quarter and going into the third things looks positive, but executives explained that are not seeing the same level of enthusiasm around homeownership seen in pre crisis levels.

But others are slightly more enthusiastic about the numbers, “We would characterize the read-through as stronger than expected given the trends we had seen in the MBA applications index and from industry estimates,” according to report from Keefe, Bruyette & Woods, specialists in financial services. 

Wells Fargo was the first to report its earnings, with JPMorgan Chase (JPM) not reporting until next Tuesday, which is a rare occurrence for the bank. 

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