JPMORGAN Chase on Friday (Apr 12) forecast full-year income from interest payments below analysts’ expectations as the industry prepares for widely expected rate cuts by the US Federal Reserve later this year.
The biggest US bank said it expects full-year net interest income, excluding trading, of US$89 billion, depending on market fluctuations. That is up from a previous estimate of US$88 billion but lower than the US$90.68 billion analysts had expected, according to LSEG.
Shares of the bank fell 4 per cent in trading before the bell. The bank’s executives have warned for months that its surging NII was not sustainable.
CEO Jamie Dimon also stuck to his cautious tone, despite growing optimism in the last several months about a soft landing for the economy.
“Many economic indicators continue to be favourable. However, looking ahead, we remain alert to a number of significant uncertain forces,” he said in a statement.
Those include “unsettling” global conflicts, persistent inflationary pressure and quantitative tightening, he said.
GET BT IN YOUR INBOX DAILY
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Profit in the first quarter, however, rose 6 per cent to US$13.42 bullion or US$4.44 per share, compared with US$12.62 billion, or US$4.10 per share, a year earlier.
High interest rates have helped lenders to boost net interest income (NII), or the difference between what banks earn on loans and pay out for deposits.
NII rose 11 per cent to US$23.2 billion. Excluding the impact of First Republic, it was still 5 per cent higher than last year.
The lender also earmarked US$725 million to replenish a government deposit insurance fund, less than the US$3 billion it set aside at the end of last year.
JPMorgan was among the banking giants that made up the bulk of contributions to the Federal Deposit Insurance Corp fund, which was drained when three regional lenders failed last year.
JPMorgan also added billions of US dollars of loans to its balance sheet after acquiring failed First Republic Bank in May last year. The purchase also fuelled JPMorgan’s interest income.
In contrast to peers that are trimming staff, JPMorgan added about 2,000 employees to its workforce of 311,921. That is 5 per cent higher than a year earlier.
It set aside US$1.88 billion as provisions for credit losses, compared with US$2.28 billion last year.
Trading revenue at JPMorgan declined 5 per cent to US$8 billion, with revenue from fixed income, currency and commodities (FICC) dropping 7 per cent and equities flat.
Investment banking revenue gained 27 per cent to US$2 billion, driven by higher fees earned on debt and stock underwriting.
Overall revenue rose 9 per cent to US$41.93 billion. REUTERS
