Juneja esitmates Wells Fargo's mortgage origination fee revenue will drop to $8.042 billion this year from $12.200 billion in 2012, but he expects this decline to be mostly offset by other items. These include "1) about $1.2 bil increase in servicing revenues; 2) $0.7 bil decline in putback expenses; and 3) $1.6 bil - $1.7 bil reduction in origination expenses but with a lag," he wrote in a report on Friday.
Juneja expects the company's mortgage putback provisions - money set aside to cover repurchase demands from mortgage-backed securities investors - to decline to $1.225 billion in 2013 from $1.940 billion in 2012.
Factoring in all of the offsetting items, the analyst estimates that the net impact from the declining mortgage volume and gain-on-sale margins to Wells Fargo's 2013 bottom line will be between $334 million and $404 million.
Wells Fargo will kick off bank earnings season next Friday, with the consensus among analysts polled by Thomson Reuters being a first-quarter profit of 88 cents a share, compared to 91 cents in the fourth quarter, and 88 cents in the first quarter of 2012
Wells Fargo's shares closed at $37.42 Thursday, returning 10% year-to-date, following a have risen 27% return in 2012. The shares trade for 1.7 times tangible book value, and for 9.6 times the consensus 2014 EPS estimate of $3.89.
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-- Written by Philip van Doorn in Jupiter, Fla.