Markets

JPMorgan to Trim Mortgage Banking Division, Slash 400 Jobs

An image of a pencil and a calculator
Credit: Shutterstock photo

Joining other lenders in trimming mortgage banking unit, JPMorganJPM plans to cut nearly 400 positions in its consumer home lending division. This news was first reported by the Wall Street Journal.

The bank is laying off employees in three states - Florida, Arizona and Ohio. Particularly, the cities including Jacksonville, Phoenix, Cleveland and Columbus are expected to face the cuts. Notably, the layoffs account for nearly 2% of JPMorgan's consumer home lending division.

Reasons Behind Layoffs

The primary reason for slashing workforce in the bank'smortgage banking division is the rising interest rates, which have resulted in increase in mortgage rates. This, in turn, has slowed down originations as well as refinancing activities.

To further compound this problem, lower number of homes available for sale, less affordability and reduced tax related incentives for home buyers seem to have added fuel to fire. Per the Mortgage Banking Association, loan applications for new home purchases declined 4.6% year over year in August 2018.

Also, rise in competition from non-bank lenders (accounting for nearly 50% of mortgage originations in the United States), which are less regulated, is one of the factors for curtailment in the mortgage banking unit.

JPMorgan spokesperson in an email statement said, "…When fewer people are struggling with their mortgages, and more people are using self-service channels, we can adjust staffing. Like all companies, we are making improvements to operate more efficiently and make slight adjustments to resources to best meet the needs of the market."

Similar Layoffs by Other Banks

JPMorgan is not the only one facing the problem. Earlier in August, Wells Fargo WFC announced its plan to cut more than 600 jobs in mortgage banking business.

Further, U.S. Bancorp's USB banking subsidiary - U.S. Bank - announced that it will cut 260 jobs, as it plans to close its Bedford mortgage and consumer banking office.In addition, MB Financial MBFI announced its plans this April to shut down its national mortgage origination business, which resulted in the layoff of nearly 600 employees at locations across Southeast Michigan.

Conclusion

Since the interest rates have started rising, JPMorgan's mortgage banking business have started facing problems. Over the last three years (2015-2017), mortgage fees and related income have declined at a CAGR of 19.8%. The slowdown in origination is likely to continue in the quarters ahead, thereby hampering growth of mortgage banking business.

Nonetheless, with rise in demand for loans and improving economy, the bank is witnessing an increase in net interest income as rates rise. This along with JPMorgan's plan to expand into 15-20 newer markets will further support revenue growth.

Shares of JPMorgan have rallied 21.6% over the past year, outperforming the industry 's rise of 8.5%.

Currently, JPMorgan carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Wells Fargo & Company (WFC): Free Stock Analysis Report

U.S. Bancorp (USB): Free Stock Analysis Report

JPMorgan Chase & Co. (JPM): Free Stock Analysis Report

MB Financial Inc. (MBFI): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

USB WFC JPM

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More