real-time news and commentary for investors
Monday, Sep 9
JPMorgan: Mortgage volume has fallen off a cliff
- Mortgage market volume reductions have been "dramatic and rapid," says JPMorgan (JPM +0.1%), presenting (slides) at the Barclays Financial Services Conference. Refinance applications are off 60% since interest rates began rising in early May. H2 originations are expected to be off 30-40% vs. H1. Chase is looking to offset this by increasing market share in the purchase market, and notes this rose to 10.7% in H1 vs. 8.6% a year ago.
- Overall, the bank insists it remains well-positioned for rising rates - models show $3.7B in extra income in the next year from a parallel 200 basis point rise in rates. This income would grow even more in subsequent years as JPM invests at higher yields. The capital impact would be small and manageable.
- Improving credit metrics should mean about $1B of reserve releases combined from credit cards and mortgages in Q3.
- The firm's leverage ratio was 4.7% in Q2 and is expected to hit 5% by 2015. JPMorgan's own target is 5.5% over time. The Q2 Basel III Tier 1 common ratio was 9.3% vs. the bank's target of 10-10.5% over time. The bank will resubmit its capital return plan to the Fed before September's end.
- Earlier: The bank responds to risk management concern by appointing two new members to its board.