Don't fret over Wells Fargo mortgage drop: Bove
Wells Fargo's third-quarter drop in mortgage originations is not particularly worrisome for the diversified company, bank analyst Dick Bove said Friday.
"From an operating standpoint, the company is doing actually pretty well," said Bove, the vice president of equity research at Rafferty Capital. "And therefore I don't think one has to worry about the fact that refinancing mortgages caused some difficulty in this quarter."
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Wells Fargo, the country's largest mortgage originator, reported record profits of $5.6 billion for the three months that ended Sept. 30, but the bank also said income from mortgage banking fell 43 percent.
Rising interest rates crimped new mortgages in the quarter, with originations dropping 29 percent, the bank said.
"I think it's obviously a significant negative," Bove said.
He added he was not particularly worried about the drop off because Wells Fargo's operating expenses were down and its loan quality is good.
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Jeffery Harte, an analyst at Sandler O'Neill, noted that Wells Fargo has been warning analysts for several months that its mortgage business would eventually slip.
"It's a cyclical, volatile business," Harte said . "It's going down sooner than we thought, but not more dramatically that we thought.