This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Mortgage Refi Boom Coming to an End but Don't Worry, Analyst Says

Stocks in this article: BAC C JPM WFC USB

NEW YORK ( TheStreet) -- The mortgage refinancing boom is coming to an end but that may not mean gloom and doom for the country's biggest banks.

In a July 25 note, Oppenheimer analyst Chris Kotowski notes that fee income for the big six banks -- Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC), U.S. Bancorp (USB) and Capital One (COF) -- was up 4.1% year-over-year, despite the decline in mortgage banking revenues.

That is because banks had other offsets, such as stronger investment banking revenues. He notes that mortgage banking revenues declined 12.5% year-over-year but investment banking revenues rose 33% and trust/brokerage/asset management fees rose 12.8%.

"Big banks' fee revenues are more diverse than people expect. Something always zigs when other things are sagging," Kotowski wrote. "In retrospect, it makes total sense that at this point last year, the economic uncertainty that brought a stampede into the bond market and generated all that re-fi activity would also have led to a dearth of investment banking activity, and now it makes sense that greater confidence leads to higher rates, fewer refi's but more banking."

He also notes that though mortgage banking accounts for a decent chunk of revenue at the big banks, it does not generate a whole lot of the profits. For instance, at JPMorgan, mortgage production revenue of $2 billion adds only $1 million to the pre-tax line and just about 6% to the earnings per share. Even if the bank had earned half as much from mortgage banking, it would have still more or less been on target on earnings.

So does mortgage banking really matter? "Mortgage banking revenues are important in that they generate a servicing portfolio which creates an ongoing annuity. They can also be an important window into a client that can be 'cross-sold' other products. We do not, however, live in dread wondering about whether bank earnings will collapse when the refi window closes, which it inevitably will," Kotowski said.

Kotowski also weighs in on the bank rally in the report. Though there was nothing startling about second quarter earnings reports, the KBW Bank Index is still up over 8% since his June 28 preview, compared to the S&P 500's return of 5%.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs