Wells Fargo, the biggest U.S. bank originator of mortgages, had its best first quarter in five years without much help from its home-loan business.
Look for that to change next quarter, based on the pipeline it reported. The San Francisco bank said it had $32 billion of unclosed first-lien mortgages that should go on its books in the current quarter, compared with $24 billion it reported for the same period a year earlier. Mortgage applications in the first quarter totaled $64 billion, compared with $58 billion a year earlier, the bank said.
Well Fargo’s pipeline is swelling as low interest rates boost demand across the country for both purchase loans and refinancings. The Mortgage Bankers Association said its refinancing application index jumped during the last week of March to the highest level in more than two years due to the lowest mortgae rates in more than a year.
Wells Fargo reported its net income in the first quarter rose to $5.9 billion from $5.1 billion a year ago. Earnings per share rose to $1.20, topping Wall Street expectations, from 96 cents.
A revival in mortgage banking revenue in the current quarter would help the bank weather the departure of CEO Tim Sloan two weeks ago. Sloan had replaced longtime CEO John Stumpf in 2016 after a scandal involving the creation of millions of fake accounts to meet sales and earnings quotas.
Allen Parker, the bank’s general counsel, took over as interim CEO as Wells Fargo searches for a replacement. On a call with analysts and investors after the release of the earnings report, Parker issued a mea culpa related to the scandal that occurred under Stumpf.
Referring to recent criticism of the bank from one of its regulators, the Office of Comptroller of the Currency, Parker said the bank “understood and appreciated” the comments that came a year after the OCC fined the bank $500 million. He added Wells Fargo has “a substantial amount of work left to do” to repair the damage done to the bank’s reputation from the scandal, and he withdrew the company’s target for the lifting restrictions imposed by another regulator, the Federal Reserve, by the end of 2019.