Daniel Pinto, President and Chief Operating Officer of JPMorgan Chase, speaks at the Semaphore 2024 Global Economic Summit in Washington, DC on April 18, 2024.
Saul Loeb | AFP | Getty Images
JPMorgan Chase Shares fell 5% on Tuesday after the bank’s president told analysts that its forecasts for net interest income and expenses for 2025 were too optimistic.
The bank expects to “roughly” reach its 2024 NII target of about $91.5 billion, but its current estimate of about $90 billion for next year is “not very reasonable” as the Fed cuts interest rates, JPMorgan President Daniel Pinto said at a financial conference.
“I think the number will be lower,” Pinto said, without giving a specific figure.
Shares of the New York-based bank fell more than 7% in early trading, their biggest drop since June 2020, according to FactSet.
JPMorgan, the largest U.S. bank by assets, has been a winner among lenders in recent years, with its NII growing faster than expected as it grew deposits and loans.But nervous investors are now fretting about the outlook for benchmark bank stocks, along with broader worries about slowing U.S. economic growth.
One of the main ways banks make profits, NII, is the difference between a bank’s cost of deposits and the revenue the bank makes on loans and investments in securities. When interest rates fall, the yields that banks get on new loans and new bonds fall.
Lower rates could be a boon for banks by discouraging customers from moving money out of checking accounts and into higher-yielding products like CDs and money-market funds, but they also reduce yields on new assets, complicating the picture.
“Obviously if interest rates go down, there’s less pressure to reprice deposits,” Pinto said. “But you know, we’re very asset sensitive.”
As for expenses, analysts are estimating costs of about $94 billion next year, but Pinto said that’s “a little bit too optimistic” because of lingering inflation and new investments the company is making.
“There are a number of factors that indicate that the expense numbers are likely to be a little higher than currently projected,” Pinto said.
On the trading side, JPMorgan said it expects third-quarter revenue to be flat to up about 2% compared to the same period last year, while investment banking fees are expected to increase 15%.
The trade slowdown Goldman SachsThe company said on Monday it expects third-quarter trading revenue to fall 10% due to a worsening year-on-year comparison and tough trading conditions in August.