JPMorgan shares slip as outlook overshadows profit rise

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JPMorgan Chase’s underwhelming outlook for its lending business overshadowed a 6 per cent rise in first-quarter profits at America’s largest bank, as investors recalibrate interest rate expectations.

The lender said net income increased to $13.4bn in the first quarter, up from $12.6bn a year earlier and better than analysts had expected. JPMorgan set aside less than analysts anticipated for loan losses. 

But shares in the company, which reported earnings on Friday along with Citigroup and Wells Fargo, were down more than 5 per cent in afternoon trading, as the bank’s guidance for net interest income disappointed investors. JPMorgan’s stock price was on track for its biggest one-day drop since early 2022.

JPMorgan lifted its full-year guidance for NII — broadly the difference between what it pays on deposits and what it earns from loans and other assets — outside of its trading business to about $89bn from an earlier forecast of about $88bn. It left its outlook for total NII unchanged at around $90bn. 

“While the guide still strikes us as ultra-conservative . . . we suspect the unchanged outlook will disappoint investors a bit and could weigh on the stock in the immediate term,” said Piper Sandler analyst Scott Siefers.

High interest rates have been good for America’s biggest banks, which have reaped billions of dollars in profits over the past two years by passing on interest rate rises to depositors more slowly than borrowers.

Financial markets have adjusted their rate expectations in recent weeks, with the US Federal Reserve now forecast to cut rates more slowly.

But banks are finally having to pass on higher savings rates to depositors, JPMorgan and Wells Fargo said on Friday. Profits at Wells fell 7 per cent in the first quarter from a year earlier.

JPMorgan chief financial officer Jeremy Barnum told analysts that customers were moving more money to accounts that offered higher savings rates, eating into the bank’s margins from lending.

“We would still expect to see ongoing migration and yield seeking behaviour,” Barnum said.

JPMorgan also warned that it now expected expenses for 2024 to be $91bn, up from $90bn previously, as it has to pay an estimated $725mn more in charges to US regulators to cover costs linked to last year’s regional bank failures.

JPMorgan chief executive Jamie Dimon said that “many economic indicators continue to be favourable”.

But he added that “looking ahead, we remain alert to a number of significant uncertain forces”, pointing to an “unsettling” global landscape and “a large number of persistent inflationary pressures”.

Rival Citi, meanwhile, reported better than expected quarterly profits as the bank said it was on track to shed 7,000 jobs this year.

Bank of America, Goldman Sachs and Morgan Stanley report results early next week.