JPMorgan expects interest income to rise even as it cites economic risks By Reuters

By Nupur Anand and Lananh Nguyen

NEW YORK (Reuters) – JPMorgan Chase predicted it would earn more revenue from high U.S. interest rates despite uncertainty hanging over the economy, executives said at the bank's investor day on Monday.

The largest US lender raised its forecast for net interest income (NII), or the difference between what it earns on loans and what it pays on deposits, to $91 billion, excluding its markets division. That figure is above a previous forecast of $89 billion in April.

The bank's shares fell 0.5% in morning trading.

JPMorgan's earlier outlook for NII had disappointed analysts who expected it to reap greater benefits from higher borrowing costs.

“The environment is becoming more complicated,” Chief Financial Officer Jeremy Barnum told investors, citing increasing regulation and geopolitical uncertainty.

NII's trajectory will likely be “noisy” in the coming quarters, with rises and falls, Barnum said.

The U.S. economy is headed for a soft landing that avoids a major recession, but the bank is prepared for risks that could derail this projection, said its president, Daniel Pinto.

“There are clearly uncertainties,” he added.

JPMorgan took on billions in loans after buying bankrupt lender First Republic last May. The purchase boosted interest income and helped drive profits to a record level.

The NII guidance “reaffirms JPM's positioning as a continued beneficiary of higher (interest rates) for longer and will be viewed positively for the stock,” even though some investors expected it, wrote Ebrahim Poonawala, banking analyst at the Bank of America. in a note.

JPMorgan has a current 11.3% market share of U.S. retail deposits, already the largest among the country's lenders. Even so, it wants to cover even more clients.

“Our goal is to serve 75% of the U.S. population within affordable driving time and ensure we serve more Americans in smaller cities, the heartland of America,” said Jennifer Roberts, chief banking officer at Chase consumption.

“We are setting a new goal of covering more than 50% of the population in each of the 48 states.”

technology BUDGET

technology spending is expected to rise to $17 billion this year from $15.5 billion in 2023, Barnum said.

Part of that budget focuses on artificial intelligence, or ai, which CEO Jamie Dimon has previously said could be as transformative as the steam engine, electricity or the Internet.

ai use cases are worth between $1 billion and $1.5 billion, Pinto said.

More broadly, the bank's total expenses are expected to rise to about $92 billion in 2024 from $85.7 billion last year, according to a presentation.

As JPMorgan comes off a year of record profits, investors are eager to learn about the company's succession plans, investments in artificial intelligence and other growth opportunities.

Dimon, 68, has led JPMorgan for more than 18 years, surpassing many other CEOs in the banking industry. In addition, several executives who worked under Dimon have gone on to run other major financial institutions, making his succession plans a long-time subject of speculation.

Dimon said last year that he could leave office in three and a half years.

JPMorgan's board recently identified Jennifer Piepszak and Troy Rohrbaugh, co-CEOs of its commercial and investment bank, as candidates for the top job. Marianne Lake, CEO of consumer and community banking, and Mary Erdoes, CEO of asset and wealth management, are also in the running.

Separately, the bank plans to increase share buybacks to return excess capital to shareholders, but will remain cautious, Barnum said.

The stock is up 20.4% in 2024, outperforming an S&P index of bank stocks as well as broader stock markets. It closed at an all-time high on Friday.