Are Wells Fargo’s Sinking Margins Indicative of a Dangerous Industry Trend?
By setting aside less money to cover bad loans, Wells Fargo (NYSE:WFC) was able to break profit records in the most recent quarter, the bank reported Friday. Coupled with an increase in revenue from mortgage fees, the change boosted profit 24 percent in the three months ended in December.
However, shares are trading lower on Friday as the bank reported that it made fewer mortgage loans in the third quarter and net interest margin declined.
Revenue from mortgage fees rose 30 percent from the year-earlier period in the fourth quarter to $3.1 billion as homeowners took advantage of low interest rates to refinance their homes. But the lower rates that are spurring refinancing are also responsible for the smaller margins that have investors concerned.
Furthermore, the bank had $81 billion in unclosed home loans at the end of the fourth quarter, down from $97 billion in the previous quarter, and issued $125 billion in mortgages in the fourth quarter, down from $139 billion in the third quarter…