US mortgage giant UWM's stock slumps despite 822% profit jump

New York

UWM Holdings, one of the United States' largest mortgage lenders, reported US$1.4 billion in net income as the newly public company capped its most profitable year ever.

Still, the 822 per cent profit surge was not enough to satisfy investors, with the company's shares dipping as much as 10 per cent to US$10.20 on Thursday in New York.

The Pontiac, Michigan-based company, better known as United Wholesale Mortgage, told investors in a statement on Wednesday that it missed its 2020 projection for originations, and that it would post lower margins on new mortgages in the quarter that ends in March.

The company's quarterly results were strong, said Henry Coffey, a Wedbush Securities analyst. But investors are nervous about the prospect of declining profitability in originating mortgages after a record 2020.

While some industry experts expect the mortgage business to slow this year, Mat Ishbia, chief executive officer of United Wholesale Mortgage, reiterated that the company's lending will grow by at least 15 per cent.

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"We haven't even come close to accomplishing all the refinances that should be in the market right now," he said in an interview.

United is the nation's largest wholesale mortgage lender, which means it provides the funds for mortgages originally handled by loan brokers. It reported US$54.7 billion in loan originations last quarter, bringing its annual total to US$182.5 billion.

The company had told prospective investors in September to expect US$200 billion in originations for the year.

United Wholesale announced a merger with Gores Holdings IV, a special purpose acquisition company, in September, riding a wave of unprecedented mortgage profits to a roughly US$16 billion valuation.

United made its public trading debut on the New York Stock Exchange two weeks ago and closed on Wednesday with a market value north of US$18 billion. The company expects to produce between US$52 billion and US$57 billion in new mortgages this quarter, said the statement.

The company also said profitability on each new mortgage will drop to as low as 2 per cent, from 3.05 per cent in the fourth quarter. BLOOMBERG