Today we continue our look at issues in the banking sector, based on the podcast we recorded with John Helfst, a banking industry analyst with 1919 Investment Counsel. In our previous post, we reviewed some of the disclosures that he typically wants to study when researching bank stocks. 

In this post we wanted to look at some of the lines of business that banks report — especially mortgage banking, which had been going like gangbusters while interest rates were low, and then fell off a cliff when the Federal Reserve began a punishing series of rate increases last year. 

We asked Helfst: how should analysts think about pressures like that? 

Much Ado About Mortgages

Helfst agreed that mortgage banking has felt a terrific squeeze in the last 12 to 18 months — and you can see that in the disclosures, as banks report various revenue streams. Small and regional banks were hurt the most, but even some large banks with sizable mortgage origination and securitization saw sharp declines in their business too. 

One elementary question is whether banks’ net interest income could make up for the collapse in non-interest income. “No,” Helfst was quick to say. So the better question to ask is whether banks’ mortgage origination, capital markets, and investment advisory lines of business can revive any time soon.

Helfst isn’t entirely sanguine about that question either. Take mortgage refinancing as an example. Even if that line of business starts to level off compared to the plunges we saw in 2022, those year-earlier plunges were so swift and so steep that today’s leveling off — assuming it actually holds, which is still an open question — isn’t much to celebrate. “Management is trying to rationalize to a lower origination volume environment,” Helfst said. 

One could make similar statements about investment banking. Private equity deals and acquisitions due to SPACs were all the rage in 2021 and early 2022. Well, now the SPAC bubble has burst, IPOs and M&A deals aren’t much better, and private equity isn’t going to pick up enough slack to overcome that drag. 

OK, enough prognostication. Where can analysts find disclosures about all these issues in Calcbench? 

We Have the Data

For starters, most large banks will break out lines of revenue that you can find on the Company-in-Detail page. For example, we looked up JPMorgan’s ($JPM) Q2 numbers for 2023 and 2022 — and sure enough, found declines in investment banking, mortgage fees, and credit cards. See Figure 1, below.

Most large banks will break out lines of business right there on the income statement, so the Company-in-Detail page is an easy place to start. 

One can also reach banks on the Interactive Disclosures page. Start by looking up the footnote disclosure on operating segments, which can provide granular detail about a bank’s lines of business, even if some banks stack their year-earlier comparables on top of each other rather than side-by-side. Figure 2, below, is an example from Wells Fargo ($WFC) in Q2 2023. 

Remember, whenever you see a disclosure that appears as a web link, that means you can use our Show Tag History feature to pull up that disclosure’s value for prior periods. You can then quickly dump those values into a spreadsheet and convert them into a chart, or if you’re using our Excel Add-in you can pull those values directly into whatever model you’re using on your desktop. 

And as always, you can read the bank’s Management Discussion & Analysis, which has even more information about various lines of business and their performance. 

In other words, Calcbench has all the segment-level data you might want to explore, to see whether the banks you follow are clawing their way back to normalcy after the Fed’s punishing series of rate hikes.