JPMorgan 2024 net interest income forecast tops estimates

Investing.com -- JPMorgan Chase (NYSE:JPM) has unveiled a forecast for annual net interest income that topped analyst estimates, while higher interest rates lifted profits to record levels in 2023.

The company said in a statement that net interest income -- the difference between what a lender pays for deposits and earns from loans -- is expected to be roughly $90 billion in its 2024 fiscal year, above Bloomberg consensus expectations of $86.08B. NII in 2023 came in at $97B.

Loan growth, particularly in credit card revolving balances, and "modest" deposit flight is expected to partly offset the impact of six projected Federal Reserve interest rate cuts throughout this year, according to a presentation prepared by JPMorgan. Chairman Jamie Dimon described the American economy as "resilient," but argued that the economy is being fueled by "large amounts" of government deficit spending and past stimulus measures.

"There is also an ongoing need for increased spending due to the green economy, the restructuring of global supply chains, higher military spending and rising healthcare costs," Dimon added. "This may lead inflation to be stickier and rates to be higher than markets expect."

Shares in JPMorgan rose by around 2% in premarket U.S. trading on Friday.

Provisions for credit losses, or the amount of reserves set aside to cover bad loans, surged versus the prior quarter to $2.76B, reflecting concerns over potential customer defaults during a time of elevated interest rates. Noninterest expenses also jumped to $3.6B, driven primarily by a $2.9B payment into a Federal Deposit Insurance Corp fund that that major Wall Street banks vowed to continuously replenish in the wake of a crisis in regional lenders last year.

Adjusted net revenue during the three months ended on Dec. 31 came in at $39.94B, below expectations of $40.23B. Fourth-quarter net income at America's biggest bank was $9.3B.

But the harsher rate environment throughout 2023, the costs of which big lenders have largely passed on to borrowers, boosted full-year net income to $49.6B -- a 32% surge versus the previous year and an all-time high.

"At first look, the results reinforce our view that JPMorgan will continue posting best-in-class profitability," analysts at HSBC said in a note. "However, elevated expectations and a premium valuation cap upside potential, in our view."