Magazine article American Banker

Chemical's Lofty Growth Goal Questioned

Magazine article American Banker

Chemical's Lofty Growth Goal Questioned

Article excerpt

Is Chemical Banking Corp. shooting too high in mortgages? That's what some analysts are wondering.

Despite the industrywide slump, Chemical has targeted home mortgages for annual revenue growth well into the double digits.

The New York giant hinted at the plan last week when announcing a massive restructuring. It said it had zeroed in on several businesses -- ranging from mortgages to global banking -- as "high- growth areas" that would get an investment of $180 million.

In a meeting with analysts, Chemical said mortgage revenues should climb by 15% annually over the next couple of years.

"It's optimistic," said Lawrence Vitale, of Bear, Stearns & Co. He noted that the mortgage industry is currently suffering through a sharp drop in originations and a fierce price war.

Mortgage originations are expected to fall by 22% next year, to $600 billion, according to the Mortgage Bankers Association of America.

"I think that when you sort through all of it, that 15% is probably going to represent (Chemical's) greatest challenge," said Judah Kraushaar, an analyst with Merrill Lynch & Co. He added that he is comfortable that the bank will meet its overall target.

For its part, Chemical is confident that mortgage banking, taken together with consumer lending, will post "some solid revenue growth," said Thomas Jacob, executive vice president of the company's national business group.

"On the mortgage side there will be servicing portfolio growth," he said. The bank plans to have a $79 billion portfolio of loan servicing rights by the end of 1996, up 40% from the current $55 billion. …

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