JPMorgan Chase & Co has raised its interest earnings forecast and confirmed its profit target at its investor conference on Monday, where executives are expected to face questions about the bank’s spending and capital management.
The country’s largest lender says it now expects net interest income (NIIs) by 2022, excluding the 56 billion market. It previously predicted that figure would exceed $ 53 billion in 2022, exceeding its $ 50 billion outlook. In January.
The news boosted the bank’s shares by more than 7% and helped lift the stock of other major US banks.
“This is a good start,” Credit Suisse analyst Susan Roth wrote in a note to Katz.
Investors are looking at the possibility of banks raising their net interest income, or the difference between interest on loans and interest on deposits and other funds, as they benefit from higher interest rates.
However, with the US Federal Reserve taking control of decades of high inflation, investors are also worried that tightening up too aggressive monetary policy could lead to a recession. These fears have pushed the S&P 500 Bank Index down 21.5% so far this year.
JPMorgan says its NII forecast is based on an estimate that the Fed will raise the short-term rate to 3% by the end of the year. It also predicted higher single-digit debt growth and a “moderate” move in securities investment.
JPMorgan scheduled an investor conference after a one-day drop in its stock in January when it said it would allow spending to increase by 8% or $ 6 billion this year, as it has financed business investments that it has not persuaded investors to justify.
On Monday, Chief Executive Jamie Damon sought to reassure investors about the increased investment, especially the bank’s technology spending.
“We’ve always had good returns when investing,” Dimon said. The charge-off for bad loans is expected to rise to pre-epidemic levels “over time” but not after 2022, thanks to strong consumer and business balance sheets, the bank said.
With the increase in debt, the provision for making reserves for losses will increase, JPMorgan added.
The company said its target of 17% return on tangible capital equity, a key metric that measures how well a bank uses shareholders’ money to generate profits, could be achieved in 2022.
Christopher Grisanti, chief equity strategist at MAI Capital Management, said JPMorgan’s report showed that investors were very pessimistic about banking stocks.
“Banking business is generally quite good, credit concerns are low, at least for the moment, and net interest margins are quite healthy because small rates have not yet come so far. So this is another example of the market crash and the exaggeration of the depression, “he said.
For 2023, the bank expects its investment spending growth rate to be “moderate”, but for 2022, the expenditure forecast has been kept unchanged at $ 77 billion. Of the $ 6.7 billion technology spending expected in 2022, the largest portion of the 3.1 billion will go to the investment banking segment, JPMorgan said.
Marianne Lake, vice president of consumer and community banking, says her business has invested an additional $ 3.3 billion from 2019 to 2022 to increase voting rights. Such investments are “like a coiled spring of future earnings power and operating leverage,” Lake said.
JPMorgan also said it expects to increase its regulatory capital requirements over the next two years, but said that in the first quarter of 2024 it will have additional capital in the range of $ 13 billion to $ 22 billion, available for business investment or distribution. Shareholders
(Reporting by David Henry in New York and Niket Nishant in Bangalore; Additional reporting by Anisha Sirkar; Editing by Shaunak Dasgupta, Michelle Price and Nick Jiminski)