JPMorgan Chase Shares Decline 5% Due to Update on Interest Income and Expense Outlook
JPMorgan Chase shares experienced a 5% decline after the bank’s president expressed concerns about overly optimistic expectations regarding net interest income and expenses for 2025. While aiming to be near the 2024 NII target of $91.5 billion, the projection for next year of approximately $90 billion was deemed unrealistic due to anticipated interest rate cuts by the Federal Reserve, according to JPMorgan President Daniel Pinto at a financial conference. Shares of the bank fell over 7% during the session, marking the steepest decline since June 2020.
As the largest U.S. bank in terms of assets, JPMorgan has seen success in recent years with stronger-than-expected NII growth fueled by increased deposits and loan activity. However, investor concerns have arisen over the bank’s future performance, alongside broader worries about a slowdown in U.S. economic growth. NII, a key revenue driver for banks, represents the difference between deposit costs and earnings from lending or investments. Lower Interest rates can impact new loan and bond yields, presenting challenges for banks.
While declining rates may alleviate pressure on deposit repricing, they also result in lower yields on new assets, complicating the financial outlook. Pinto indicated that the analyst estimate of around $94 billion for 2025 expenses may be too optimistic due to ongoing Inflation and increased investments by the firm. Additionally, JPMorgan expects trading revenue in the third quarter to remain flat or increase by approximately 2% year-over-year, with a projected 15% rise in investment banking fees.
The trading performance aligns with Goldman Sachs’ recent announcement of an anticipated 10% drop in trading revenue for the quarter, attributed to challenging trading conditions in August and a tough year-over-year comparison.
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Emily Jensen, graduated from the London School of Economics and Political Science (LSE) in the UK in 2015 with a degree in Economics. She specializes in financial markets and international trade. After graduating, she worked as an analyst at an investment bank in London, where she developed expertise in global economic trends. She later transitioned into consulting, focusing on fintech ventures and providing insights into global economic developments. Emily is passionate about the intersection of finance and technology and aims to drive innovation in the financial sector.