JPMorgan Chase & Co lifted its interest earnings forecast and confirmed its profit target at its investor conference on Monday, sending its stock up 6% despite constant questions about how much more it would spend on its business.
The country’s largest lender says it expects net interest income (NIIs) to drop to বাজার 56 billion in 2022. It has previously predicted that this number will reach more than $ 53 billion in “composite billion” by 2022, up from its $ 50 billion outlook in January.
Investors differentiate between net interest income, loan income and interest paid on deposits and other funds, as they benefit from higher interest rates and banks are keeping a close eye on the possibility of higher returns.
Shares of JPMorgan rose steadily on Monday, closing down 6.2% as investors digested the good news and the bank sued to increase its spending. Shares of other major US banks also rose sharply.
JPMorgan scheduled the conference after it surprised investors in January when it said it would allow spending to increase by 8% or $ 6 billion.
The bank has been a leader in many of its businesses and has been more profitable than its peers. But those successes have cast doubt on investors’ ability to increase profits.
JPMorgan chief executive officer Jamie Dimon and other executives spent most of the day trying to reassure investors that technology, new products and marketing costs would pay the necessary and long-term costs to stay ahead of competitors, but some analysts remained unreliable.
“The bottom line is that you’re still spending a lot of money this year,” Matt O’Connor, an analyst at Deutsche Bank, told Dimon. “Are you doing too much at once?” He asked.
Damon, known for his straightforward speaking style, bristled. “We spent all day trying to answer this question,” he replied, adding: “We’ve shown you the opportunity.”
For 2023, JPMorgan expects its investment spending growth rate to be “moderate”, but its 2022 spending forecast remains unchanged at $ 77 billion.
Executives say JPMorgan is spending to hire bankers and hire new customers for asset management, commercial lending and business financing, both in the United States and increasingly abroad.
By not holding an annual conference last year, the bank has gone too far without fully explaining its strategy, said Dimon, who promised to hold another conference next year.
As the US Federal Reserve struggles to control decades of high inflation, investors worry that tightening up too aggressive monetary policy will lead the economy to a recession. These fears pushed the S&P 500 Bank Index down 21.5% this year.
The risk of a recession was “the elephant in the house”, acknowledged Marian Lake, vice president of consumer and community banking.
Damon said the current threats to the economy are serious, but that a bust is not inevitable as home prices plummeted before the 2007-2009 financial crisis. The charge-off for bad loans is expected to rise to pre-epidemic levels “over time” but not after 2022, the bank said, due to strong consumer and business balance sheets.
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,” he said.
“Market downturns and depression have been exacerbated.”
(Reporting by David Henry in New York and Niket Nishant in Bangalore; Additional reporting by Anisha Sirkar; Editing by Shaunak Dasgupta, Michelle Price, Nick Jiminski and Bernard Orr)