JPMorgan lifts target for interest income growth amid rising rates

JPMorgan Chase increased its guidance for how much it will earn in 2022 from its core lending business to more than $56bn, from at least $53bn previously, as the Wall Street bank anticipates it will benefit from rising interest rates.

The upgraded outlook was disclosed in a presentation for JPMorgan’s investor day, which kicked off at 8am eastern time on Monday. The event is a platform for Jamie Dimon, JPMorgan’s chief executive since 2005, to respond to shareholder concerns over his spending plans for the largest US bank by assets.

Analysts had expected the lender would use the event to lift its net interest income guidance — the difference between what banks pay on deposits and what they earn from loans and other assets — after the Federal Reserve indicated it would raise rates faster than planned in order to combat high inflation. The NII excludes lending in its fixed income and equity markets business.

Deutsche Bank analysts had predicted JPMorgan’s new NII target would be $55bn to $56bn.

Higher rates should enable lenders such as JPMorgan to earn more from the loans they make. However, some analysts are concerned aggressive tightening risks pushing the US economy into a recession, an environment in which banks often struggle.

The bank maintained its roughly 17 per cent medium-term target for return on tangible common equity, an important measure of profitability, and said it “may be achieved in 2022”. 

Dimon had cautioned in January, before the Fed signalled it would raise rates more quickly, that the bank’s spending plans would probably mean it would miss the target this year and next.

In the lead-up to investor day, the bank had flagged that it would provide more detail on what shareholders can expect from the $15bn in investment spending that JPMorgan announced in January and which had spooked the market.

The bank left unchanged its outlook that expenses in 2022 will be about $77bn. 

The event comes just days after shareholders delivered a rebuke over Dimon’s pay, with less than a third voting to sign off on the bank’s executive compensation for 2021, the lowest level of support since it started holding such votes more than a decade ago. Investors particularly took issue with a special award of $50mn. 

JPMorgan shares, which have underperformed the broader KBW Bank index this year, were up about 1.4 per cent in pre-market trading.

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