This Day On The Street
Continue to site
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

Wells Fargo Continues Mortgage Staff Layoffs as Refinancing Volume Drops

Updated from 8:37 a.m. ET with market reaction and bank stock action, following the announcement of $920 million in fines against JPMorgan Chase.

NEW YORK ( TheStreet) -- Wells Fargo (WFC - Get Report) late Wednesday confirmed plans for 1,800 additional layoffs of mortgage production staff, according to a Bloomberg report.

The latest announcement brings the total of Wells Fargo layoffs announced during the third quarter to 4,800, including the 2,300 mortgage origination positions eliminated during August.

In the aftermath of the credit crisis of 2008, Wells Fargo took over from Bank of America (BAC - Get Report) as the nation's leading mortgage loan originator. The sharp rise in long-term interest rates since April -- as the market has anticipated an eventual tapering of "QE3" bond purchases by the Federal Reserve -- has led to a sharp drop in mortgage refinance applications and overall mortgage lending volume across the industry.

With mortgage interest rates bottoming out during 2012, the total volume of refinancing in the United States was a whopping $1.247 trillion during 2012, according to the Mortgage Bankers Association. The MBA projects a decline in mortgage refinancing volume to $973 billion this year, with an even sharper decline to $388 billion in 2014. The trade group expects total mortgage loan originations to decline from $1.750 trillion in 2012 to $1.592 trillion in 2013 and $1.091 trillion in 2014.

Wells Fargo's head of mortgage origination, Franklyn Codel, at a conference in May said the company was very well positioned for the expected volume drop, with its sales staff 100% commission-based, and with frequent meetings to gauge staffing levels.

The bank has been focused on holding down its efficiency ratio, which essentially is the number of pennies of overhead expense it incurs for each dollar of revenue. Wells Fargo's efficiency ratio improved to 57.3% in the second quarter from 58.3% the previous quarter and 58.2% a year earlier. During the company's second-quarter earnings conference call, Chief Financial Officer Timothy Sloan said the bank was expecting the efficiency ratio "to remain within our target range of 55% to 59%."

Highlighting industry revenue concerns, JPMorgan Chase analyst Vivek Juneja in his third-quarter earnings preview for the largest banks on Wednesday estimated Wells Fargo's third-quarter revenue would total $20.724 billion, declining from $21.378 billion in the second quarter and $21.213 billion in the third quarter of 2012.

Wells Fargo continues to be the earnings performer among the "big four" U.S. banks on a relative basis. Its second-quarter return on average assets (ROA) was 1.54% and its return on average tangible common equity (ROTCE) was 16.99%, according to Thomson Reuters Bank Insight. Well Fargo's ROA over the past five quarters had ranged from 1.40% to 1.54% over the past five quarters, while its ROTCE has ranged from 16.27% to 16.99%.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.56 0.00%
C $46.28 0.00%
JPM $63.20 0.00%
WFC $49.98 0.00%
AAPL $93.74 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs