The Wells Fargo mortgage gravy train may be coming to the end of the line.
At least that’s the fear investors appeared to be harboring yesterday — fresh off the San Francisco bank’s ringing up record fourth-quarter profits of $5.09 billion, or 91 cents a share.
Revenue in the period jumped 7 percent, to $21.9 billion.
But investors, fearing the salad days of home lending are wilting, pushed Wells’ shares down 0.9 percent, to $35.10.
The gloom extended to most bank stocks, which ended the day in the red.
Critics of the bank, run by John Stumpf, argue that the bank used portions of its deposits to aggressively grab mortgage market share from rivals — a risky strategy that could backfire if rates continue to remain too low and the housing market struggles to rebound.
The largest US home lender also revealed signs that mortgage applications, driven in large part by a wave of refinancing activity over the last nine months of the year, are starting to wane.
Stumpf is betting that the housing market and the overall economy are turning a corner.
Wells originated some $520 billion in mortgages in 2012 and took some 30.3 percent of the home loan market share, ahead of rivals like JPMorgan Chase.
The Wells CEO noted that the bank is “generating strong results” and said that despite regulatory rules changes, the bank would “benefit from some signs of growth that are being generated in the economy.”
That said, he did warn that there’s still more work to be done to get the market back to a real position of strength.
Like many banks, however, Wells continued to struggle to eke out better returns on its loans. The bank’s so-called net interest margins — the difference between what it pays depositors and what it generates on interest on its assets — narrowed by 10 basis points, to 3.56 percent.
That’s a sign for other banks, including JPMorgan Chase, Citigroup and Bank of America, that banks are still finding it tough to make money on plain vanilla loans except through the massive volumes enjoyed lately.