Wells Fargo & Co (WFC): Can History Repeat Itself?

So, in terms of book value and interest income, JPMorgan Chase & Co. (NYSE:JPM) is expected to report growth. However, a slowdown in the overall refinancing activity and new mortgage production would hit JPMorgan Chase & Co. (NYSE:JPM)’s mortgage banking unit because it has the second largest market share in the U.S. home lending markets.

U.S. Bancorp (NYSE:USB) is another large cap bank with the third largest market share in the U.S. home lending markets. It, too, is expected by Credit Suisse to report a moderate growth of 0.2% in its book value this quarter, despite the hike in interest rates. The strength in the bank fundamentals can be seen in a lot of areas including its expanding profit margins and net income, growth in earnings per share, and a notable return on equity.

Over the prior year, U.S. Bancorp (NYSE:USB) demonstrated 9% growth in EPS, while the gross profit margin increased to 83.7%.

Conclusion

I believe history will not repeat itself this quarter and Wells Fargo & Co (NYSE:WFC) will report lower mortgage banking returns due to lower refinancing activity. The hike in the rates doesn’t stop hurting Wells Fargo here. The bank is further expected to report the highest hit to its book value this quarter. In contrast, U.S. Bancorp (NYSE:USB) and JPMorgan Chase offer a better investment opportunity. Despite significant exposures in the U.S. home lending markets, both JPMorgan and US Bancorp are expected to report growth in their book values this quarter.

The article Wells Fargo: Can History Repeat Itself? originally appeared on Fool.com and is written by Adnan Khan.

Adnan Khan has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of JPMorgan Chase & Co (NYSE:JPM). and Wells Fargo. Adnan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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