“Second-quarter credit performance was in line with our expectations,” Wells Fargo CEO Charlie Scharf told analysts. “Consumers are benefiting from a strong labor market and rising wages. Performance in our consumer auto portfolio continued to improve reflecting our prior credit tightening actions, and we saw net recoveries in our mortgage portfolio.”
Citi, the smallest of the mortgage sector's three depository institutions, originated $4.3 billion in mortgages from April through June, up 39% from the previous quarter but down 4% from the same period in 2023.
As loan volume increased, JPMorgan also expanded its servicing portfolio in the second quarter, while Wells Fargo did not. JPMorgan's mortgage servicing rights (MSRs) increased to $8.8 billion in the second quarter of 2024, up from $8.6 billion in the first quarter of 2024 and $8.2 billion in the second quarter of 2023.
Meanwhile, Wells Fargo's MSRs (measured at end-of-period book value) fell 3% quarter-over-quarter to $7 billion in 2Q24. Outstanding principal balances (UPBs) fell 14% year-over-year.
Revenue Generation
The mortgage business brought in net revenue of $1.3 billion for JPMorgan in the second quarter of 2024, up 11% from $1.18 billion in the previous quarter. The bank's servicing revenue was $189 million in the second quarter of 2024, up from $144 million in the previous quarter.
JPMorgan Chief Financial Officer Jeremy Burnham told analysts the mortgage revenue performance was “primarily driven by increased net interest income.”
Wells Fargo reported $823 million in income related to its mortgage business in the second quarter of 2024. The bank said in a statement that mortgages were down 3% year over year due to “lower net interest income due to lower loan balances” and down 5% quarter over quarter due to lower mortgage banking income.
Chief Financial Officer Michael Santomasimo said Wells Fargo's revenue decline reflects its focus on streamlining its mortgage business and the continued weakness in the mortgage market. “Since announcing our new strategy at the beginning of 2023, we have reduced our mortgage headcount by approximately 45%,” he said.
The bank also generated $243 million in non-interest income from mortgage banking in the second quarter of 2024, up from $230 million in the prior quarter. Net service revenues decreased 2% sequentially but increased 44% year-over-year to $89 million.
Overall, JPMorgan made $18 billion in profits in the second quarter, or $13.1 billion excluding special items such as a multibillion-dollar gain on the Visa stock swap, but the economy showed “some progress that has led to lower inflation,” according to CEO and chairman Jamie Dimon.
“However, we still face multiple inflationary drivers, including large budget deficits, infrastructure needs, trade reorganization and global rearmament, which could mean inflation and interest rates remain higher than markets expect,” Dimon said in a statement.
Wells Fargo reported a net income of $4.9 billion in the second quarter, while Citi made a profit of $3.2 billion in the same period. Citi CEO Jane Fraser said the bank has made “tremendous progress in simplifying both strategically and organizationally.”