By Nupur Anand and Lananh Nguyen
NEW YORK (Reuters) -JPMorgan Chase predicted it would earn more income from elevated U.S. interest rates despite uncertainty hanging over the economy, executives said at the bank’s investor day on Monday.
The biggest U.S. lender raised its forecast for net interest income (NII), or the difference between what it makes on loans and pays out on deposits, to $91 billion, excluding its markets division. That is above a previous forecast of $89 billion in April.
The bank’s shares slid 0.5% in late 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 getting more complicated,” Chief Financial Officer Jeremy Barnum told investors, citing increasing regulation and geopolitical uncertainty.
The path of NII will probably be “noisy” in the coming quarters, with increases and declines, Barnum said.
The U.S. economy is headed for a soft landing that avoids a major downturn, but the bank is prepared for risks that could derail this projection, its president, Daniel Pinto, said.
“Clearly, there are uncertainties,” he added.
JPMorgan acquired billions in loans after it bought collapsed lender First Republic last May. The purchase fueled interest income and helped propel profits to a record high.
The NII guidance “reaffirms JPM’s positioning as a continued beneficiary from higher for longer (interest rates) and will be viewed positively for the stock,” even though it was expected by some investors, Ebrahim Poonawala, a banking analyst at Bank of America, wrote in a note.
JPMorgan has a current market share of 11.3% of U.S. retail deposits, which is already the largest among the nation’s lenders. Still, it wants to cover even more customers.
“We aim to cover 75% of the U.S. population within an accessible drive time and to ensure we serve more Americans in smaller cities, America’s heartland,” said Jennifer Roberts, CEO of consumer banking at Chase.
“We are setting a new objective of covering over 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.
Some of that budget is focused 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 represent a value of about $1 billion to $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.
With JPMorgan coming off a year of record profits, investors are eager to learn about the firm’s succession plans, investments in AI and other growth opportunities.
Dimon, 68, has run JPMorgan for more than 18 years, outlasting many other CEOs in the banking industry. Also, several executives, who served under Dimon, have gone on to run other major financial institutions, making his succession plans a longtime subject of speculation.
Dimon said last year that he could step down in 3-1/2 years.
JPMorgan’s board recently identified Jennifer Piepszak and Troy Rohrbaugh, the 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 stock buybacks to return excess capital to shareholders, but will stay cautious, Barnum said.
The stock has risen 20.4% in 2024, outpacing an S&P index of bank shares as well as the broader equity markets. It closed at a record high on Friday.
(Reporting by Nupur Anand and Lananh Nguyen in New York and Manya Saini in Bengaluru, additional reporting by Saeed Azhar; editing by Anil D’Silva, Chizu Nomiyama and Jonathan Oatis)