JPMorgan Chase & Co has raised its interest earnings forecast and confirmed its profit targets with the opening of an 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 (NII) of 56 56 billion by 2022, excluding the market. It has previously predicted that NII will be more than 53 53 billion outside of its market business in 2022. $ 50 billion outlook in January.
Shares in Premarket Trading rose 1.4% to 119.50.
“This is a good start,” Credit Suisse analyst Susan Roth Katz wrote in a note after viewing the presentation slides.
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 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,” Daemon said during the opening of the conference.
JPMorgan says its 2022 outlook for NII is based on an assumption 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. 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 also confirmed a target of 17% return on Tangible Capital Equity (ROTCE) and said that it could be achieved in 2022. ROTCE is a key metric that measures how well a bank uses its shareholders’ money for profit.
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.
JPMorgan noted that in 2023 it may change some of its plans for investment spending, such as credit card marketing, depending on the economic environment.
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.
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; Edited by Shaunak Dasgupta and Nick Jiminski)