Daniel Pinto, President and Chief Operating Officer of JPMorgan Chase, speaks during the Semafor 2024 Global Economic Summit in Washington, DC, on April 18, 2024.
Saul Loeb | AFP | Getty Images
JPMorgan Chase Shares fell 7% on Tuesday after the bank's president told analysts that expectations for net interest income and expense in 2025 were too optimistic.
While the bank expects to be close to its 2024 NII target of about $91.5 billion, the current estimate for next year of about $90 billion is “not very reasonable” because the Federal Reserve will cut interest rates, JPMorgan President Daniel Pinto said at a financial conference.
“I think that figure will be lower,” said Pinto, although he declined to give a specific figure.
The stock's move was the New York-based bank's worst drop since June 2020, according to FactSet.
JPMorgan, the largest U.S. bank by assets, has been a winner among lenders in recent years, benefiting from better-than-expected growth in NII as the bank took in more deposits and made more loans than expected. But nervous investors are now worried about the outlook for a benchmark bank stock, along with broader concerns about slowing U.S. economic growth.
The NII, one of the main ways banks make money, is the difference between the cost of a bank's deposits and what it earns by lending money or investing it in securities. When interest rates fall, new loans the bank makes and new bonds it buys will yield less.
Falling rates may help banks in that customers will reduce the rotation of their checking accounts into higher-yielding instruments such as certificates of deposit or money market funds, but they also make new assets yield lower, complicating the outlook.
“It's clear that as rates come down, there's less pressure on deposit pricing,” Pinto said. “But as you know, we're quite asset sensitive.”
On the expense side, analysts' estimate for next year of about $94 billion “is also a bit too optimistic” because of persistent inflation and new investments the company is making, Pinto said.
“There are a lot of components that tell us that the expense number will probably be a little bit higher than expected at this point,” Pinto said.
On the trading side, JPMorgan said it expects third-quarter revenue to be flat or up about 2% from a year ago, while investment banking fees are on track to rise 15%.
Trade slowdown continues Goldman Sachswhich said on Monday that quarterly trading revenue was on track for a 10% drop due to a tough year-over-year comparison and difficult trading conditions in August.
