The final numbers are lining up as 2012 comes to a close and the shocker is that in terms of net income, Wells Fargo is far exceeding expectations. In fact with $17.9 billion recorded as the net thus far, the financial institution outperformed Wal-Mart by over $1 billion and did more than three times better than fast-food giant, McDonald’s. Wells Fargo’s totals were only behind JPMorgan Chase, and the country’s two largest oil companies, Chevron and ExxonMobil.
How Did They Turn it Around? Mortgages.
With so many other financial institutions are still trying to keep their heads above water after the economic downturn, how did Wells Fargo do it? Last year, the company experienced substantial growth in all of its divisions. However, many economists attribute its impressive success its growing home mortgage segment.
As the housing industry recovers, there is big money to be made in the mortgage market. In November alone, the year-over-year (y-o-y) comparison for home sales showed a 10.9% increase. The website, The Motley Fool, recently ran an article about Wells Fargo’s domination of the 2012 mortgage market. The article reported than in the third quarter, Wells Fargo, “originated a staggering $139 billion in home mortgages, up from an equally staggering $131 billion during the second quarter.” This dramatically surpassed the closest runner-up, JPMorgan Chase, who did only $47 billion. According to the story, in the first half of 2012, Wells Fargo originated “one of every three new mortgages in the entire country, up from one out of 10 in 2004.” In terms of dollars and cents, Wells Fargo’s command of the mortgage sector, taps directly into a $10 trillion market!
For any lender, being directly linked to home loan borrowers has significant advantages. After the time consuming and highly in-depth process that borrowers go through to secure a home loan, if all goes well, positive relationships are formed and trust is established. A bank analyst from Rochdale Securities, Dick Rove, explains what happens next:
“If you sell a household a mortgage, the household will ultimately bring you the student loan, home equity, and other loans.”
Considering that the bank is originating one of every three new mortgages, it appears that Wells Fargo has found its “Golden Ticket.”