The nation's commercial banks backed away from collateralized mortgage obligations last year, trimming their holdings by $11.6 billion, or about 8%, as of the end of September.
However, their holdings of home mortgages climbed $43 billion, or 9%. And bank portfolios of mortgage-backed securities rose by $5.5 billion from the level a year earlier, or about 3%, according to data compiled by American Banker.
The net result was that total mortgage investments by banks climbed about 7.6%. But with other assets growing at about the same pace, mortgage investments continued to account for about the same proportion of bank assets, at 20.6%, virtually unchanged over 12 months.
Banks also held their own in share of total mortgage investments, at about 25%, little changed in a year, with whole loans accounting for almost two-thirds of the total.
The impending merger of Wells Fargo Bank and First Interstate Bank of California will push the combined company into the No. 3 spot among mortgage investors after BankAmerica Corp.'s Bank of America and the merged Chemical Bank and Chase Manhattan Bank.
Wells and First Interstate together had about $21 billion of mortgage investments at Sept. 30. But the two banks were heading in different directions in the mortgage business; Wells cut its mortgage investments by about 32% in the 12 months through September, while First Interstate built its holdings by about 20%
Wells has backed away from retail home lending, hiring Norwest Mortgage Co. to originate on its behalf.
The 32% reduction by Wells was the biggest for any bank, well ahead of No. 2 Fleet Bank in Hartford, Conn., at about 25%, and NBD Bank, Detroit, about 23%.
Among the largest bank companies, NationsBank Corp. had the top gain in total mortgage investments, about 61%. The Morgan Guaranty Trust Co. unit of J.P. Morgan & Co., New York, had a 54% increase, and First Union National Bank of Florida, Jacksonville, climbed 52%.