The mortgage units of some of the nation's largest banking companies had a strong second quarter, despite declining loan demand.

Though originations generally fell from the first quarter, the big players more than made up for the lost business with servicing revenues. Some also reported strong growth in cross-selling.

"I thought it was a solid quarter for mortgage banking," said Chip Dickson, a bank analyst at the Salomon Smith Barney unit of Citigroup. At Wells Fargo & Co. and Chase Manhattan Corp., mortgage units accounted for less than 5% of total earnings but still made significant contributions, Mr. Dickson said.

"The mortgage product can be a very effective product, but like other parts of the financial services business, it is consolidating," he said. "Some of these players will be the consolidators."

Executives at the mortgage banking units were upbeat.

"It was an outstanding quarter for us. Our cash operating earnings were 20% higher than second quarter of last year," said Steve Rotella, chief operating officer at Chase Manhattan Mortgage Corp. The Edison, N.J., lender was the nation's top mortgage originator, with $27.9 billion of loans in the quarter, up from $18.86 billion a year earlier. Its servicing portfolio grew to $245 billion, from $185 billion.

Earnings growth was driven by increases in production and servicing businesses and bolstered by Chase's home equity and manufactured housing businesses, he said.

Mr. Rotella also said the company did well in cross-sales and in retaining customers who refinanced. He said the slowdown in refinancing would have a larger impact in the second half of the year but that lending to finance new purchases would rise.

Norwest Mortgage Inc., the Des Moines mortgage unit of Wells Fargo & Co., originated $23 billion of loans, down from $26 billion a year earlier and $28 billion in the first quarter.

But its earnings rose 30%, to $70 million. Norwest said its business has also grown through Wells Fargo's banking offices in Washington, Oregon, Utah, Idaho, Nevada, and Arizona, which now have Norwest Mortgage representatives.

Fleet Mortgage Group of Columbia, S.C., originated $9.72 billion, up from $9 billion a year earlier. Mortgage production revenue of $54 million was up from $53 million in the first quarter but down from $66 million the year before.

Fleet's loan servicing revenue grew $13 million in the second quarter, to $133 million. Its servicing portfolio grew to $127.8 billion, from $116.3 billion a year earlier. Mortgage banking revenue increased to $95 million, from $91 million in the first quarter. The company said its earnings growth came despite a downturn in originations, largely because of a balanced strategy for its origination and servicing businesses.

Bank of America Mortgage in Dallas originated $18.68 billion, down from $18.94 billion in the first quarter and $20.04 billion of combined originations by NationsBank and Bank of America in the second quarter of 1998. The two companies merged last September.

Bank of America's servicing revenue in the second quarter fell to $125 million, from $207 million a year earlier. The servicing portfolio, however, grew to $273.8 billion, from $227.7 billion.

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