Wells Fargo Is Beating Us in Mortgages, Dimon Tells Cramer

NEW YORK ( TheStreet) -- JPMorgan Chase ( JPM) CEO James Dimon in an interview on CNBC with Jim Cramer on Friday expressed confidence that the New York banking giant could compete in the mortgage business with Wells Fargo.

Cramer pointed out that Wells Fargo's second-quarter mortgage revenue held up from the previous quarter, while JPMorgan saw a "7% origination decline."

Cramer added "Wells is not seeing those numbers."

JPMorgan reported a 7% drop in mortgage originations from the previous quarter to $49 billion as interest rates rates rose, while Wells Fargo still managed a slight 3% increase to $112 billion.

JPMorgan said the sharp rise in interest rates had hurt refinancing volume more than expected. If rates stay at this level or move higher, the refinance market could fall by 30% to 40%, CFO Marianne Lake told analysts during the conference call following results.

While the purchase market was still doing well, it was unlikely to offset the decline in refinancing.

Referring to Wells Fargo CEO John Stumpf, Cramer asked Dimon "Is he just out-mortgaging you?"

Dimon said "Yes he is. I love John Stumpf, they do a better job in the mortgage business than us," but added that following the acquisitions of Bear Stearns and the failed Washington Mutual, "our systems weren't great." Dimon went on to say "we have a new management team in place, and at the end of the day we're going to have a great mortgage business."

"We believe like John that it is an important product. We are really good at production, we are really good at servicing, we just have more wood to chop than he does."

"We've gone from 9% to 10% to 11%" mortgage market share, Dimon said, adding that "I think you'll see our share go up over time."

When Cramer asked about anemic small business lending, even in light of Federal Reserve Chairman Ben Bernanke "doing everything he can" Dimon said "small business will recover with the economy. When the economy starts to grow, you're going to see small businesses take off, and their credit needs grow."

Cramer asked Dimon about the effect of the new regulatory environment on commercial credit decisions. Dimon said "eventually you'll be back to business as usual. That may take another year or two."

"We're getting to the tail end of Basel III," Dimon said, "and maybe by the end of this year we'll actually know what all the details of the proposed and finalized capital rules are."

"There's nothing that's not going to look better," Dimon said.

The CEO continued to cheerlead during his interview on the New York Stock Exchange trading floor: "The United States has one of the best economies the world has ever seen, and the widest, deepest, most transparent capital markets that were part of the engine that made this country great. So let's make sure that when we're all said and done with these rules, that we've still got this.

Cramer quoted Senator Elizabeth Warren (D., Mass) -- among a group of four senators introducing a bill Thursday to bring back the Glass-Steagall Act's separation of investment banks from commercial banks -- as saying steps need to be taken to "keep gamblers out of our banks."

Dimon responded by saying "you'd be surprised at how risk-averse we are," and that "the riskiest thing we do is loans."

When Cramer asked if the largest U.S. banks, including JPMorgan and Wells Fargo were "too big to regulate," Dimon said "we all have an interest in a sound and safe financial system... A lot of the rules and regulators are going to make it safe and sounder."

Dimon said the rules already in place under the Dodd-Frank Wall Street Reform and Consumer Protection act of 2010 "are going to accomplish that over time" in a way that "doesn't hurt the taxpayer and doesn't hurt the economy."

Cramer asked if JPMorgan now has adequate risk-management controls in place, in light of various regulator orders and the reported $6.2 billion in losses from the "London Whale" hedge trading debacle last year.

Dimon said "if you acknowledge your faults you can fix them... I think we're going to make the regulators happy with what we're doing."

"The management team is as good as I have ever seen," Dimon said.

Cramer asked Dimon "Would you have quit if the board of directors had separated the chairmanship from the CEO?"

Dimon said "No. I was clear that I would never leave my company high and dry." He also made clear that the board of directors was running the company.

"The board meets every single time without me. The board hires and fires me."

When asked by Cramer about the effect of the eventual curbing of the Federal Reserve's monetary stimulus on the bank and the overall economy, Dimon said "I believe in the process of normalization you're going to have some volatility... Look past the volatility... As long as the economy is strong, then I think we're going to be fine."

JPMorgan's shares were up slightly in late morning trading, to $55.21.

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-- Written by Shanthi Bharatwaj in New York and Philip van Doorn in Jupiter, Fla.

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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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