Business

Stage is set for Wells Fargo ‘hay’day

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Cheap home loans and a recovering US housing markets are expected to produce solid fourth-quarter profits for Wells Fargo, analysts said.

The San Francisco bank is the No. 1 US mortgage lender and boasts a commanding 30.3 percent market share.

The US housing market could also blow wind into Wells Fargo’s sails for 2014, analysts added.

The bank, run by Chief Executive John Stumpf, will report fourth-quarter and full-year results today.

Wells and other banks have been enjoying bargain basement interest rates on 30-year loans, which hit an all-time low of 3.31 percent in late November, according to Freddie Mac data.

Indeed, more than 70 percent of the $1.8 trillion in home-loan activity last year was related to refinancings, according to Guy Cecala, editor of Inside Mortgage Finance.

Total origination also was up 20 percent from last year’s 1.5 trillion, Cecala noted.

That mortgage boom is expected to help drive Wells’ revenues of more than $21 billion and profits of about 89 cents a share.

Wells has continued to make hay in mortgages while its once formidable competitors, including JPMorgan Chase and Bank of America, have either reverted primarily to refinacings or have all but sworn off the mortgage business.

While Wells dominates the home-lending game, some analysts warn that new capital requirements and tougher mortgage regulations coming out of the Consumer Finance Protection Bureau could make the mortgage business way less profitable.

That said, some analysts are still forecasting a rosy outlook for Wells despite the potential headwinds.

“We think that refinancing activity will continue well into 2014 and that will be a big benefit to Wells because its [rivals] have been reluctant mortgage lenders,” said FBR Capital Markets bank analyst Paul Miller.