JPMorgan Chase (JPM - Get Report) crushed Wall Street's second quarter estimates, but mortgage banking revenue fell 26% year-over-year to $1.43 billion.

"As rates have risen, the mortgage market has gotten a little smaller," said Mike Weinbach, CEO of Chase Home Lending. "Volume is a little bit lower than it was a year ago - and margins are tighter as other players in the industry have excess capacity so that leads to tightening of margins, which leads to a little bit of a reduction in revenue and profitability."

Weinbach said this is a short-term phenomenon.

"It takes time for the market to adjust to the new level of interest rates," he said.

The Federal Reserve raised interest rates four times since the 2008 financial crisis, though financial conditions have eased since then.

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