Wednesday, 11 September 2024
by BD Banks
Shares of JPMorgan Chase (NYSE: JPM), the largest bank by assets in the U.S., had slid roughly 7% as of 12:12 p.m. ET on Tuesday after management essentially lowered its guidance for net interest income (NII), a key source of revenue. NII looks at the difference between what a bank earns on its interest-earning assets such as loans and what it pays out on interest-bearing liabilities such as deposits.
The analyst consensus had been modeling roughly $90 billion of net interest income in 2025, according to Visible Alpha, which is now owned by S&P Global Market Intelligence. At an industry conference earlier this morning, chief operating officer Daniel Pinto called the estimate “not very reasonable,” although he did not provide specific guidance.
Pinto also told analysts to expect investment banking fees to climb 15% year over year in the third quarter, while markets revenue could grow 2%. But Wall Street had been modeling for 22% year-over-year growth in investment banking fees and 4% growth in markets revenue, according to Visible Alpha. All of these comments will surely bring analyst estimates down in the coming days.
After two very strong quarters of NII to start the year, analysts seem to have gotten ahead of themselves, and management at JPMorgan even said on the second-quarter earnings call that it has been over-earning on NII.
Despite the near-term headwinds from lowering guidance, I still like JPMorgan as a long-term stock. It has always been a very well-run company, and management continues to believe it can generate consistent 17% returns on tangible common equity in normal environments, which is one of the best among its peers.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.