JPMorgan Chase (JPM), the largest U.S. bank, took a significant hit on Tuesday with shares down 5.2%. This drop was triggered by remarks made by the company’s president, Daniel Pinto, who raised concerns about overly optimistic projections for the bank’s 2025 net interest income (NII) and expenses.
Pinto expects that the Federal Reserve’s anticipated interest rate cuts will negatively affect JPM’s NII, the difference between what the bank earns on loans and what it pays out on deposits. He said that the current analyst consensus estimate for JPMorgan’s 2025 NII of $90 billion is unrealistically high. Pinto also noted that expenses are likely to exceed the $93.7 billion projection due to inflation and ongoing investments.
This outlook has fueled investor pessimism, impacting other major banks like Goldman Sachs (GS) and Citigroup (C).
JPMorgan Sees Modest Growth in Trading Revenue
Shifting focus to JPMorgan’s trading revenue, Pinto indicated that the bank expects flat or modest growth of up to 2% in Q3 trading revenue. This view is consistent with comments from Goldman Sachs CEO David Solomon, who forecasted a 10% decline in Q3 trading revenue, citing challenges in monetizing client flows, particularly in fixed-income trading.
Despite the headwinds, JPMorgan’s investment banking division remains a bright spot. The bank reported a record profit in the second quarter, driven by a 46% surge in investment banking revenue. This trend is expected to continue, with JPM forecasting a 15% increase in Q3 investment banking fees.
Is JPM Stock a Buy, Sell, or Hold?
Despite Pinto’s comments that cautioned investors about the bank’s performance next year, three Top-rated Analysts reiterated a Buy rating on JPM stock.
Turning to Wall Street, JPM has a Strong Buy consensus rating based on 16 Buys and four Holds assigned in the last three months. At $224.48, the average JPMorgan price target implies 9.2% upside potential. Shares of the company have gained about 23% year-to-date.
