JPMorgan Chase improved its own forecast on two fronts during its Investor Day on Monday.
The bank has predicted that its net interest income – the difference between what it pays for deposits and what it earns on loans and other assets – could top $56 billion in 2022, far exceeding $50 billion. billion estimated in January.
He also said he could achieve a 17% return on tangible common stock this year – a figure he previously only associated with a “medium term”. Chief Financial Officer Jeremy Barnum warned investors in January that headwinds such as rising costs could prevent the bank from hitting that index this year and next.
CEO Jamie Dimon cemented that reversal in his opening remarks on Monday, saying “there’s a very good chance this year” of hitting 17% – and exceeding the target in 2023, given an environment of “benign” credit, according to CNBC.
The investor day — JPMorgan’s first since 2020 — notably allows Dimon to address shareholder concerns about the bank’s spending plans.
But the bank also said on Monday it would hire about 1,300 advisers over the next three years in a bid to grow its wealth management assets to more than $1 trillion. The bank has added 1,100 advisers since 2017, Jennifer Piepszak, the bank’s co-CEO for consumer and community banking, said Monday, according to Bloomberg. Monday’s increase would take the workforce to 6,000 councilors from around 4,700.
Meanwhile, the bank maintained its estimate that it would save $77 billion in spending this year — an 8.6% increase from 2021 — to bolster its technology, compete for talent and expand its offerings.
This figure drew criticism from analysts earlier in the year. “This issue is certain for us: upfront spending for less certain side benefits,” Wells Fargo analyst Mike Mayo wrote in a January note, according to CNBC. The $77 billion includes $15 billion for capital expenditures, which JPMorgan executives have since required more detailed explanation.
“It’s a good start,” said Susan Roth, an analyst at Credit Suisse. Katzke wrote on Monday, according to Reuters.
Investor confidence in JPMorgan appeared shaken last week when shareholders in a non-binding vote cast just 31% support for the bank’s compensation plan, which included one-time rewards from worth tens of millions of dollars in restricted stock to Dimon and Chairman Daniel Pinto. . JPMorgan’s stock value had fallen 28.4% since mid-January, according to Yahoo Finance, but was up 5.9% by midday Monday, according to CNBC.
The bank said $3.1 billion of its expected technology spending of $6.7 billion in 2022 would go to the investment banking division, adding that it may change some of its plans for technology spending. 2023 investment, such as credit card marketing, depending on the economic environment, Reuters reported. . JPMorgan said the growth rate of its capital expenditures “will moderate.”
However, not all business ventures will be immediately profitable. JPMorgan expects to lose $450 million this year on its British consumer bank, Sanoke Viswanathan, CEO of the bank’s international consumer unit, said on Monday, according to Reuters, adding that the business is expected to hit the threshold of profitability in five to six years.
British consumer bank Chase has amassed $10 billion in customer deposits since its launch eight months ago and attracted 500,000 customers, Viswanathan said.
“We have always had good returns while making investments,” Dimon said on Monday, according to Reuters.
The bank expects its regulatory capital requirements to increase over the next two years, but will have $13 billion to $22 billion in excess capital in the first quarter of 2024, the news service reported.
JPMorgan’s updated net interest income figure, meanwhile, assumes the Federal Reserve raises short-term interest rates to as much as 3% by the end of 2022.
Dimon added a recession is possible but would be unique in its combination of economic factors.
“Strong economy, big storm clouds,” he said, according to Bloomberg. Dimon distinguished between storms and the clouds from which they originate, saying clouds “can dissipate.”
Dimon isn’t the only major bank CEO this month to warn of a potential recession. Goldman Sachs CEO David Solomon said last week that “extremely punitive” inflation could lead to such a slowdown, but he ultimately downplayed the likelihood of it happening.
Other JPMorgan executives, including Pinto, Barnum and Marianne Lake, the other co-head of the bank’s consumer and community banking unit, are also expected to speak at Monday’s Investor Day.
“As we said, investors asked good questions,” a JPMorgan spokesperson told the Financial Times ahead of the event.