PNC Financial Services Group Inc. (PNC:US), the second-largest U.S. regional bank, said total home loan production this year could be the lowest since the 1990s.
“It’s going to be a real tough year in origination,” Chief Executive Officer Bill Demchak said today at an investor conference in New York. “You’re going to see it shake out a number of players at the margin because there is quite clearly much more capacity in the market right now than there is people who want mortgages.”
Wells Fargo & Co. and JPMorgan Chase & Co. are also grappling for pieces of a shrinking mortgage market as demand for home loans declines and investors and cash buyers dominate some sales. First-quarter noninterest income from residential mortgages, which accounted for about a 10th of PNC’s noninterest earnings, fell 31 percent from a year earlier, the company said.
“It’s never going to be a big driver of our earnings,” Demchak, 51, said. “But it’s an important product. If you tie that to where you think the future of retail goes and the need to have reasons for people to come visit you in physical space, mortgage has got to be part of that.”
Mortgage revenue plunged 42 percent at JPMorgan in the first quarter as higher interest rates curtailed refinancing, while Wells Fargo reported a 46 percent drop in mortgage banking income during the period. San Francisco-based Wells Fargo expects second-quarter mortgage production to be less than previously forecast, Chief Financial Officer John Shrewsberry said at today’s conference.
“The loan pipeline is stronger than it was in the first quarter, but probably not as strong as we might have imagined it’d be,” Shrewsberry, 49, said. “It’s still registering appropriate profitability. But we might have imagined that there would be more of it a quarter ago.”
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