JPMorgan forecasts lower-than-expected NII in 2024

JPMorgan forecasts lower-than-expected NII in 2024

(Reuters) -JPMorgan Chase on Friday forecast full-year income from interest payments below analysts’ expectations as the industry prepares for widely expected rate cuts by the U.S. Federal Reserve later this year.

The biggest U.S. bank said it expects full-year net interest income, excluding trading, of $89 billion, depending on market fluctuations. That is up from a previous estimate of $88 billion but lower than the $90.68 billion analysts had expected, according to LSEG.

Shares of the bank fell 4% 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 favorable. 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.

Profit in the first quarter, however, rose 6% to $13.42 bullion or $4.44 per share, compared with $12.62 billion, or $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% to $23.2 billion. Excluding the impact of First Republic, it was still 5% higher than last year.

The lender also earmarked $725 million to replenish a government deposit insurance fund, less than the $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 dollars of loans to its balance sheet after acquiring failed First Republic Bank in May last year. The purchase also fueled 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% higher than a year earlier.

It set aside $1.88 billion as provisions for credit losses, compared with $2.28 billion last year.

Trading revenue at JPMorgan declined 5% to $8 billion, with revenue from fixed income, currency and commodities (FICC) dropping 7% and equities flat.

Investment banking revenue gained 27% to $2 billion, driven by higher fees earned on debt and stock underwriting.

Overall revenue rose 9% to $41.93 billion.

(Reporting by Niket Nishant in Bengaluru and Nupur Anand in New York, editing by Lananh Nguyen and Anil D’Silva)