The benefits of high interest rates are fading for the nation's biggest banks as depositors increasingly moved funds to higher-interest-bearing accounts last quarter.

Between the lines: Wells Fargo said today its net interest income (NII) — the amount it earns from lending vs. what it pays to depositors — fell 8% in the first quarter, compared with a year earlier, amid "customer migration to higher yielding deposit products."

• JPMorgan Chase saw NII decline 4% sequentially.

Customers are increasingly transferring funds from checking and savings accounts to higher-yielding CDs, JPMorgan CFO Jeremy Barnum said on a conference call.

• "Ongoing migration" is likely to continue, he added. "Even if the current yield curve environment were to change and meaningful cuts were to get reintroduced ... we would still expect to see ongoing migration and yield-seeking behavior."

Investment banking activity surged in the quarter, fueled mainly by underwriting fees as companies tapped debt and equity markets.

• JPMorgan's IB fees rose 21% year over year to $2 billion, boosted by underwriting.
• At Citigroup, the figure jumped 32% to $977 million.
• And Wells Fargo reported a 92% increase, to $627 million.

Yes, but: Sustained higher rates could negatively impact that business in coming quarters, as well.

• "Yields on corporate bonds are heading up again as investors have pared back expectations of rate cuts this year," the Wall Street Journal reported. "That means that fee income from debt issuance may head back down again."

📈 BlackRock's Larry Fink predicts the Fed will cut interest rates twice in 2024 but fail to achieve 2% inflation. (CNBC)

🎟️ StubHub is planning to go public by late summer. (The Information)

Billionaire Mat Ishbia's mortgage empire is the focus of a federal lawsuit alleging that borrowers nationwide paid inflated fees.

Between the lines: The lawsuit accuses Ishbia and his Michigan-based company United Wholesale Mortgage of drumming up business by misleading borrowers into thinking their mortgage brokers would be shopping for the best deal.

• Instead, the business model allegedly funneled thousands of borrowers to UWM, which then charged excessive fees that could amount to billions of dollars.

The big picture: Ishbia has led UWM to the top of the mortgage industry with divisive business tactics and an unapologetic disdain for the competition.

• In 2023, he bought a majority stake in the Phoenix Suns and WNBA's Phoenix Mercury for $4 billion.

Zoom in: The allegations came at the same time that Hunterbrook Media, a news site affiliated with hedge fund Hunterbrook Capital, published a story critical of UWM.

• Hunterbrook is affiliated with Hunterbrook Capital, which has taken a short position on UWM's stock.
• UWM released a statement saying that Hunterbrook's article is "riddled with inaccuracies" and the lawsuit is "frivolous."

Catch up quick: UWM's business is built on relationships with independent — or wholesale — mortgage brokers who are hired by borrowers to find the best mortgage for them.

• Brokers can earn a 1%–2% commission for their efforts. They are different from retail mortgage brokers employed by lenders such as Wells Fargo and Bank of America.

Friction point: According to the lawsuit, UWM enticed wholesale brokers with various perks to funnel borrowers toward UWM, which then charged excessive fees.

• Last year, more than 8,000 wholesale brokers funneled to UWM 99% or more of their mortgages, which were valued at approximately $11.7 billion, the lawsuit claims.

The dispute over UWM's business practices amplifies the bitter rivalry between Ishbia and fellow national mortgage titan Dan Gilbert.

Why it matters: Ishbia and Gilbert — each from the Detroit area — are both giants in the mortgage business and owners of NBA teams.

• Gilbert founded Detroit-based Rocket Mortgage, formerly known as Quicken Loans, and owns the Cleveland Cavaliers.
• Pontiac, Michigan-based UWM and Rocket Mortgage are fierce competitors.

The intrigue: Ishbia last week suggested that Gilbert funded the Hunterbrook article.

The other side: A spokesperson for Gilbert's Rocket Mortgage denied any financial interest in Hunterbrook or involvement in its article about UWM, per the Detroit News.

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