Inside Wells Fargo’s mortgage conundrum

Hi, Aaron Weinman here. Let’s talk about Wells Fargo, and specifically, its mortgage-lending business — long a profit center for the bank.

But before I kick that off, a bit on old mate and Fed Chair Jay Powell, who appeared in front of the Senate Banking Committee on Wednesday (and will appear before the House Financial Services Committee today). One can’t really talk about mortgages without linking to Powell’s quest to hike rates.

Interest-rate hikes are one of the Fed’s go-to tools to fight inflation. But Powell said that increased rates won’t provide the quick relief we’d hoped for, especially when it comes to food and gas prices. The Fed’s mission to cool the economy also translates to pricier home loans, a key factor in Wells’ decision to resize its mortgages business.

By the way, I stopped by CBS News last night to talk about Powell’s testimony – watch the clip here.

Now then, let’s get to it.

If this was forwarded to you, sign up here. Download Insider’s app here.

1. There’s more pain to come for Wells’ mortgage business as staff cuts loom and profits weaken amid rising interest rates. Analysts are pontificating over how the unit fits into CEO Charlie Scharf’s master plan.

Wells has long been a leader in the US mortgage-lending space. But, as Insider has previously reported, Scharf’s been signaling that the bank will pare back its exposure to home loans.

The San Francisco-headquartered bank wants to invest in other areas like credit cards and investment banking in a bid to compete with peers like JPMorgan Chase, Bank of America, and Citi.

The downsizing of mortgages, meanwhile, brings into question Wells’ reputation as the Wall Street bank that appeals to “Main Street” because of its broad relationships with American consumers.

Such changes have raised questions over …read more

Source:: Businessinsider

Leave a Reply

Your email address will not be published.