Wells Fargo Isn’t Yet Ready to Cede Mortgage Crown to Quicken

Wells Fargo & Co. isn’t giving up its mortgage-lending crown without a fight.

The bank wants to hold on to its top spot as the whale of the $1.7 billion industry in the U.S., even as it predicts profit margins on making home loans will shrink this year and it faces pressure from rival Quicken Loans Inc.

“We want to be No. 1 regardless of who we’re competing with, because that’s the position we hold and we’re enthusiastic about it,” Chief Financial Officer John Shrewsberry said in an interview.

Wells Fargo and other large lenders have been slowly ceding share back to non-bank firms in the mortgage business since the time of the financial crisis, when banks dominated the market. Meantime, Quicken charged past almost every U.S. mortgage provider — except Wells Fargo — by unfurling technology like its online Rocket Mortgage platform. In a December interview with Bloomberg News, Chairman Dan Gilbert said his company would soon overtake the leader.

“We’ll be the largest retail market share lender within a short period of time,” the billionaire said.

Read More: Dan Gilbert’s Quicken Takes On Big Tech After Beating the Banks

Still, they’ve got a long way to go. Wells Fargo originated $231 billion of retail mortgages in the year ended Sept. 30, while Quicken’s total was about $88 billion, according to an investor document seen by Bloomberg News. Third-ranked JPMorgan Chase & Co. created $42 billion.

Shrewsberry said Friday that Quicken’s business is “disproportionately a refinancing business” compared with other lenders that have a large proportion of original mortgages, also known as purchase mortgages.

Greg Bartosch, a spokesman for Detroit, Michigan-based Quicken, didn’t have an immediate comment.

Shrewsberry thinks an upcoming digital app for mortgages, expected to be introduced this quarter, will bring Wells Fargo some advantages over Quicken by making use of the bank’s existing customer data to pre-fill applications.

“I’m anxious to see how many folks take advantage of that because it’s a real streamlining aggravation-preventer for our retail customer,” he said.

Yet profits could be hard to come by. Shrewsberry told analysts Friday on a conference call for fourth-quarter earnings that the bank expects its profit margin on new mortgages to fall during the first quarter of 2018. The firm’s production margin for residential mortgage originations was 1.25 percent during the fourth quarter. Income from mortgage banking declined 35 percent compared with a year earlier, according to a statement Friday.

Quicken generated an average gain-on-sale margin of about 4.1 percent, according to the investor document. Net revenue company-wide fell 5.1 percent during the first nine months of 2017 compared to the same period a year earlier, the document shows.

— With assistance by Joe Light

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