NEW YORK: JPMorgan Chase & Co lifted its forecast for interest income and affirmed its profitability target as it opened an investor conference on Monday, where executives are expected to face questions on the bank’s expenses and management of its capital.
The country’s largest lender said it now expects net interest income (NII), excluding markets, of $56 billion in 2022. It had earlier forecast NII outside its market business to reach a “couple billion” more than $53 billion in 2022, up from its $50 billion outlook in January.
Shares were up 1.4% at $119.50 in premarket trading.
“This is a good start,” analyst Susan Roth Katzke of Credit Suisse wrote in a note after seeing the presentation slides. Investors are keeping an eye on the prospects for banks to increase their net interest income, or the difference between income from loans and interest paid on deposits and other funds, as they benefit from higher interest rates.
However, as the US Federal Reserve rushes to contain decades-high inflation, investors are also worried that overly aggressive monetary policy tightening will tip the economy over into a recession. These fears have driven the S&P 500 banks index down 21.5% so far this year.
JPMorgan scheduled the investor conference following a one-day drop in its stock in January when it said it would allow expenses to increase 8%, or $6 billion, this year as it funded business investments that it did not persuasively justify to investors.
Chief executive Jamie Dimon on Monday looked to reassure investors over those increased investments, in particular the bank’s technology expenditure. “We have always earned good returns while making investments,” Dimon said as he opened the conference.
JPMorgan said its 2022 outlook for NII was based on an assumption that the Fed raises short-term rates up to 3% by year-end. It also assumed high single-digit loans growth and a “modest” step up in securities investments. Charge-offs for bad loans are estimated to rise to pre-pandemic levels “over time” but not until after 2022, thanks to strong consumer and business balance sheets, the bank said.
Provisions to build loss reserves will increase with loan growth, JPMorgan added. The company also affirmed target for a 17% return on tangible capital equity (ROTCE) and said it may be achieved in 2022. ROTCE is a key metric which measures how well a bank uses shareholder money to produce profit.
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