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TheStreet Open House

Bank of America Seen Taking Share in Mortgage Market

NEW YORK ( TheStreet) -- Bank of America (BAC) is seeing a recovery in its mortgage origination business and could see its market share grow in the coming quarters, according to analysts.

The bank was one of only two among the top 10 banks that saw an increase in its origination market share in the first quarter, according to a report from JPMorgan analyst Vivek Juneja. The bank saw mortgage originations rise 57% year over year to $23.9 billion in the first quarter, according to the report, giving it an estimated market share of 5%. That is up from a market share of 4.2% in the fourth quarter.

The only other big bank to expand share was JPMorgan Chase (JPM), which saw its share tick up to 10.9%.

Meanwhile, Wells Fargo (WFC) continues to dominate the business, though it is giving up share quite quickly. Its estimated market share has dropped from 35% in the first quarter of 2012 to 22% in 2013, according to Juneja. Wells Fargo has been decreasing its presence in the correspondent lending business.


More than 90% of Bank of America's originations in the first quarter came from refinancing. The bank said during its analyst call that it expects no slowdown in the pipeline and that it continues to expand hiring to keep pace with volumes.


Morgan Stanley analyst Betsy Graseck earlier this week upgraded the bank to overweight, arguing that it is in for a major earnings rebound. "We see an earnings inflection point based on the convergence of visible cost cutting, rising home prices driving mortgage originations, reduction in legacy assets and shrinking tail risks," Graseck said in a note on Bank of America to clients on Tuesday.

The analyst expects Bank of America to increase its share to between 10% and 12% over time. "BAC's market share is already up 130 bp from trough levels in 1Q12 to 5.6% in 1Q13; we expect it to rise to ~7% by 4Q13, 8% in 2014, and 10-12% long term, in line with BAC's deposit market share but below BAC's peak market share of 18-20% in 2009-10 post exiting wholesale and correspondent channels," she wrote.

-- Written by Shanthi Bharatwaj in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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