By Christina Rexrode
Mortgage banking is making up a much smaller piece of Wells
Fargo & Co.'s fee pie.
Mortgage production accounted for 6%, or $572 million, of the
bank's overall noninterest income in the first quarter, Chief
Financial Officer John Shrewsberry noted in a presentation to
investors Tuesday. In the same period a year ago, mortgage
production accounted for 23% of fee income, or about $2.48
billion.
Over the same period, trust and investment fees expanded, as did
the catchall "other" fee category, which includes brokerage
advisory fees and card fees.
Like other banks, Wells Fargo is funding far fewer mortgages
than it did a year ago, as interest-rate increases tamp down on
homeowners' desire to refinance.
But the question about how to handle the change is especially
pressing at Wells Fargo, which is the country's biggest mortgage
lender.
Mr. Shrewsberry said investors were right to have asked two
years ago what Wells Fargo would do when the refinancing boom
fizzled. He said Tuesday he expects the mortgage business to
stabilize--but, he added, bank executives "remain excited about"
other lines of fee-earning business.
Mr. Shrewsberry was named to the CFO post last month but
officially started the job Thursday. This marked his first public
appearance as CFO.
Wells Fargo also increased its target payout ratio, a measure
tied to the amount of dividends and share buybacks the bank is able
to return to shareholders, to a range of 55% to 75%, up from 50% to
65% before.
The net payout ratio reflects the amount of value being returned
to shareholders through dividends and buybacks as a percentage of
the firm's profits. The bank had set its earlier target two years
ago.
In March, Wells Fargo got permission from the Federal Reserve to
raise its dividend to 35 cents from 30 cents per quarter, and to
expand its share-buyback program. The bank's net payout ratio was
34% in 2013, up from 14% in 2011. The bank left other goals
unchanged, including for return on equity and efficiency ratio.
Write to Christina Rexrode at cristina.rexrode@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires