New York, NY – JPMorgan Chase experienced a significant drop in its shares, marking the largest decline in almost four years on Friday. The decrease was largely attributed to a lackluster outlook for its lending business, which overshadowed an increase in profits during the first quarter for the largest bank in the United States.
During the first quarter, JPMorgan reported a net income of $13.4 billion – a 6% increase from the previous year and surpassing analysts’ expectations. Despite setting aside fewer funds for loan losses than anticipated by analysts, the bank’s shares closed down by 6.5%, the sharpest one-day drop since June 2020.
Investors were disappointed by the bank’s guidance for net interest income (NII), as concerns grew over whether the significant gains from higher interest rates in recent years had peaked. The bank raised its full-year guidance for NII, excluding its trading business, to around $89 billion, but maintained its overall NII outlook at approximately $90 billion.
Analyst Scott Siefers from Piper Sandler noted that the unchanged outlook, while appearing overly conservative, might disappoint investors and put pressure on the stock in the short term. The adjustment in rate expectations by financial markets indicates a slower expected rate cut by the US Federal Reserve.
JPMorgan’s Chief Financial Officer, Jeremy Barnum, mentioned that customers were shifting their funds into accounts offering higher savings rates, impacting the bank’s lending margins. The bank also warned of increased expenses for 2024, with estimated charges of $725 million to cover costs related to regional bank failures in the previous year.
Despite challenges, JPMorgan’s Chief Executive, Jamie Dimon, remains optimistic about economic indicators. However, he acknowledged significant uncertainties ahead, citing global uncertainties and persistent inflationary pressures. Rival Citigroup reported better-than-expected quarterly profits and revealed plans to cut 7,000 jobs this year, with shares falling by 1.7% on Friday.
Looking ahead, Bank of America, Goldman Sachs, and Morgan Stanley are expected to announce their results early next week, providing further insights into the banking sector’s performance. The evolving landscape of the banking industry indicates ongoing challenges and opportunities for major financial institutions.