Bank of America's lost opportunity
It's been no secret that Bank of America has lost its appetite to compete for the top spot in the consumer mortgage market and has ceded the top position to Wells Fargo.
Bank of America has fallen from first to fourth and it is apparently happy with being a laggard. As DealBook notes, "The bank, which already has sharply scaled back in making mortgages, on Monday sold off about 20 percent of its loan servicing business as part of its agreement to pay the housing finance giant Fannie Mae more than $11 billion to settle a bitter dispute over bad mortgages."
One analyst said that, "Bank of America is sending a clear message that the bank only wants to be the mortgage lender to a select, small group of people."
This raises an obvious question: Is the bank exiting a market that is poised to soar?
No one can faulty CEO Brian Moynihan for wanting to wash his hands of mortgages. The Countrywide deal may have proven a bit too traumatic, but the reality is that mortgage loom as a huge revenue source for consumer banks. The market is hardly the drag it once was in the aftermath of the recession. A refinancing boom seems to be continuing.
Wells Fargo and JPMorgan Chase seem to be the best positioned to take advantage of this, while Bank of America exits, leaving lots of revenue on the table.
It will be hard for the bank to reassert itself now, but it may have to before too long. Recall former CEO Ken Lewis's words in 2007 after a tough investment banking quarter: "I never say never, but I've had all the fun I can stand in investment banking at the moment."
People thought that meant he would never buy an investment bank, but he ended up buying Merrill Lynch.
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