The bank gave disappointing guidance on interest income

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JPMorgan Chase on Friday posted profit and revenue that topped Wall Street estimates as credit costs and trading revenue came in better than expected.
Per-share earnings would’ve been 19 cents higher excluding a $725 million boost to an FDIC fee covering costs from last year’s bank failures.
Revenue climbed 8% to $42.55 billion as the bank generated more interest income thanks to higher rates and larger loan balances.
But in guidance for 2024, the bank said it expected net interest income of around $90 billion, which is essentially unchanged from its previous forecast.
That appeared to disappoint investors, some of whom expected JPMorgan to raise its guidance by $2 billion to $3 billion for the year.
JPMorgan posted a $1.88 billion provision for credit losses in the quarter, far below the $2.7 billion expected by analysts.
“Especially in office, the story is well known, and as far as we can see, it’s not getting better,” Barnum said.
Large banks are expected to outperform smaller ones, which tend to have larger exposures to commercial real estate, this quarter.

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Due to better-than-expected credit costs and trading revenue, JPMorgan Chase reported profit and revenue on Friday that exceeded Wall Street projections.

The following is a comparison between the company’s report and the estimates provided by analysts surveyed by LSEG, Originally Refinitiv.

Profits: $4.44 per share as compared to… $4.11 was anticipated.

Revenue: $425.55 billion as opposed to. Expectations of $41.85 billion.

The bank claimed that its acquisition of First Republic during the regional banking crisis last year helped to boost its first-quarter profit, which increased 6% to $13.42 billion, or $4.44 per share, over the same period the previous year. If not for a $725 million increase in the FDIC fee to cover costs associated with the bank failures from the previous year, earnings per share would have increased by 19 cents.

Growth in interest income from higher rates and larger loan balances helped the bank generate $8 percent more revenue, or $42.55 billion.

However, the bank stated that its guidance for 2024 was that it expected net interest income to be approximately $90 billion, essentially unchanged from its prior estimate.

Investors seemed disappointed by that, as some had anticipated that JPMorgan would increase its guidance for the year by $2 to $3 billion. On Friday, JPMorgan’s stock dropped by over 6%.

According to Piper Sandler analyst Scott Siefers’ note on Friday, “we suspect the unchanged outlook will disappoint investors,” even though the NII guidance “strikes us as ultra-conservative (and now leaves room to be revised upward later on).

JPMorgan reported a quarter-end provision for credit losses of $1.88 billion, significantly less than the $2.7 billion analysts had predicted. Because the company released some reserves for loan losses rather than building them as it did a year earlier, the provision was 17% lower than it was a year earlier.

Although trading revenue as a whole decreased by 5% from the previous year, results for fixed income and equities exceeded analysts’ projections by more than $100 million, totaling $5.3 billion and $2.7 billion, respectively.

The CEO of JPMorgan, Jamie Dimon, praised the company’s “strong” performance in both the institutional and consumer domains, attributing it to the continued strength of the U. s. economy, but he issued a warning about what lay ahead.

“A lot of economic signs are still positive,” Dimon stated. In the future, though, there are still a lot of major unknown factors to be aware of, such as inflationary pressures and foreign conflicts.

However, the largest U. s. While bank by assets has done a good job navigating the rate environment since the Federal Reserve started raising rates two years ago, smaller competitors have seen a reduction in their earnings.

Due to customers moving their money into higher-yielding instruments, the industry has been forced to reimburse deposits, which has reduced margins. Additionally, growing concern is being expressed over increased credit card defaults and growing losses from commercial loans, particularly those secured by office buildings and multifamily homes.

During a Friday media call, CFO Jeremy Barnum addressed questions regarding commercial real estate and stated that while JPMorgan increased its reserves for the asset class last year, he saw no indications of improvement.

As far as we can tell, the story is still not getting better, especially in the office, according to Barnum. From what we can see, there isn’t any hope for improvement there. “.

This quarter, large banks are anticipated to perform better than smaller ones, which typically have greater exposures to commercial real estate.

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