July 8, 2023 | Premium Service | If we told you that a bunch of mortgage companies and specialty banks focused on housing were outperforming much of the rest of financials in the public equity markets, even as interest rates rise, would you believe it? Oh, and home prices are rising too. Most readers of The Institutional Risk Analyst know that some members of our mortgage equity group have outperformed the large-cap banks. Whether this evolution is warranted or sustainable is not even debatable, as discussed below.
You perchance noticed that Fifth-Third Bancorp (FITB) pulled out of mortgage warehouse lending last week, this after less than a year in that channel. Suffice to say that FITB is not considered a particularly serious player in the world of secured finance. The Comerica (CMA) exit was another matter entirely. Skittish behavior by large regional banks fleeing commercial loan markets is further evidence suggesting that Q2 2023 earnings may hold more than a few surprises for banks and nonbanks alike.