Wells Fargo & Company
) has achieved a milestone by recording the biggest market share in
mortgage originations in the first quarter of 2012. The company has
made this strategic expansion when some of its rivals are
retreating from this market.
Notably, apart form achieving the top position, the company's
market share also rose over three times than that of its closest
JPMorgan Chase & Co.
According to Bloomberg, which cited the Inside Mortgage Finance
newsletter, in the first quarter Wells Fargo made a whopping 33.9%
of the $385 billion of the mortgages originated. This represents an
upside from the 30.1% that the company made in the prior
Compared to Wells Fargo, the shares of its rivals are meager.
JPMorgan has just 10.6% of the market share.
), which came fifth last time, climbed to the third position with a
market share of 5.2%.
Bank of America Corp.
) occupied the fourth position with a 4.2% market share.
Wells Fargo had strategically curtailed mortgage lending during
the boom period when a number of its rivals had augmented their
market share by sacrificing their underwriting standards.
Countrywide, which was an aggressive lender that suffered huge
losses with the bursting of the housing bubble, was ultimately
acquired by Bank of America in 2008. This acquisition resulted in
Bank of America incurring huge losses in the recent period and the
company is scaling back its mortgage lending business.
), which was placed fourth last time, came to the fifth position
with the company restricting its mortgage lending business.
This retreat by its rivals has opened up ample opportunities to
gain market share, which is what Wells Fargo is doing. Last month,
the company reported better-than-expected earnings aided by a
growth in mortgage banking revenue.
Notably, Wells Fargo's mortgage banking revenue in the first
quarter came in at $2.9 billion, up $506 million from the prior
quarter. This was achieved on $129 billion of originations in the
reported quarter, compared with $120 billion of originations in the
prior period. The unclosed pipeline as of March 31, 2012, was
$79 billion, up from $72 billion as of December 31, 2011.
Besides Wells Fargo, U.S. Bancorp is also capitalizing on the
market share growing opportunities in the mortgage lending
business. The company is stepping up its resources to augment its
business in this domain in the days ahead.
Such strategic expansion efforts are encouraging. Holding a
substantial market share may subject Wells Fargo to increased
regulatory scrutiny, but we believe a disciplined approach on part
of the company will help it enjoy the leading position.
Currently, the shares of Wells Fargo have a Zacks #3 Rank, which
translates into a short-term Hold rating. Additionally, considering
the fundamentals we maintain our long-term Neutral recommendation
on the stock.
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