At its annual Investor Day, JPMorgan Chase (JPM, Financial) raised its FY24 net interest income (NII) guidance to approximately $91 billion (excluding Markets) from its prior outlook of about $89 billion. This adjustment comes as the bank now expects only two interest rate cuts this year, down from the six previously anticipated.
- The revised forecast follows a surge in JPM's stock, which hit all-time highs last Friday, gaining over 50% since the end of last October. This may explain the muted reaction in the stock, as some profit-taking could be occurring.
- JPM also increased its FY24 expense guidance by $1 billion to approximately $92 billion, reflecting a $1 billion Foundation contribution. CEO Jamie Dimon expressed caution regarding macroeconomic factors, noting that the environment is changing and that 2023's tailwinds could turn into headwinds.
- Last week, Dimon mentioned in a Bloomberg interview that "there are a lot of inflationary forces in front of us." He had previously made cautious comments during the Q1 earnings call on April 12, highlighting the volatile and unsettling global geopolitical landscape and the incomplete effects of quantitative tightening.
Despite these concerns, the slightly stronger FY24 NII outlook is a positive development for JPM.
- In Q1, JPM's NII declined by 4% sequentially due to margin compression and lower deposit balances. This was an industry-wide issue as higher interest rates led customers to move out of checking accounts and into higher-yielding products like CDs. The improved NII forecast mitigates concerns about this trend creating stronger headwinds in Q2.
The main takeaway is that JPM's increased NII guidance is a modest positive for the stock, which may need a breather following its significant rally to record highs. Meanwhile, CEO Jamie Dimon continues to balance highlighting JPM's business strength with caution about ongoing macroeconomic risks and uncertainties.
