Mortgages to fall to two-year low, but Wells says it will adjust

Rising mortgage rates have dramatically slowed the flood of refinancings that have propelled Wells Fargo to record earnings in recent quarters, but Chief Financial Officer Tim Sloan spent the better part of an hour Monday assuring investors the bank would be able to keep growing.

Sloan estimated that the bank would originate $80 billion in mortgage loans in the third quarter, which would be a nearly 30 percent drop from the quarter before. It would also end a string of seven straight quarters of $100 billion-plus in originations, according to Wells latest earnings report.

"We've been in this business for over 30 years, and we've seen cycles in terms of the growth of the business and decline in the business," Sloan told the audience at the Barclays-sponsored conference in New York City. "We will continue to make adjustments."

One big adjustment has been in staffing of the Wells Fargo's mortgage fulfillment division. The bank has announced more than 3,000 jobs cuts in the past two months in that unit, Sloan said, including nearly 300 in Charlotte.

Sloan pointed out that the headcount has fluctuated widely in the past three years as the bank has responded to the market. The bank added about 6,000 employees in 2010, then cut back by 5,000 the next year, according to a slide in Sloan's presentation. Before the most recent cuts, the bank had added 10,000 employees over nearly two years.

Sloan said cost adjustments would continue over the next quarter or two. In the meantime, he said Wells Fargo's other lines of business should continue to improve -- without offering many specifics -- and keep the bank's earnings improving as well. The bank's earnings per share have increased for 14 quarters in a row.

"The expenses will come out of the next couple of quarters," he said. "We're hopeful to be able to grow earnings over that same period."