JPMorgan trims net interest income forecast for 2020 but eyes revenue offset

September 15, 2020. Print article

, the largest U.S. bank by assets, cut projected net interest income for 2020 while pointing to signs that offsetting business increases could see it through the current stretch of low loan growth.

The New York-based bank now anticipates net interest income for 2020 to total $55 billion, JPMorgan Chief Financial Officer Jen Piepszak said Tuesday, a $1 billion decrease from the bank’s prior projection. Speaking virtually at the Global Financial Services Conference, Piepszak joined major U.S. rivals in tempering investors’ expectations as pandemic-related uncertainty continues to muddy the economic outlook.

Changing consumer habits have driven much of the slump in loan demand, Piepszak said. Customers have been saving more and paying down credit-card loans and mortgages during the outbreak, limiting their need for new credit from the bank.

On the wholesale side of the business, she said JPMorgan’s clients are holding liquidity more than previously expected, leading to a “challenged” loan growth environment.

Asked about the outlook for fiscal 2021, Piepszak said “four quarters of a very low rate environment” could put JPMorgan on track for net interest income of “$13 billion, plus or minus, [per] quarter.”

Uncertainty was an important theme of the executive’s projections for the remainder of 2020 and 2021.

“We have an election, we have a potential second wave [of COVID-19], we have tapering of stimulus,” Piepszak said. “There’s still lots of things to be worried about.”

Even so, “Things look better than we thought they would” at the end of the second quarter, she added. Third-quarter trading revenue will likely increase 20% year-over-year, potentially cushioning the hit on interest income.

Speaking separately at the conference, CEO Brian Moynihan said Tuesday that net interest income at his company would drop at least $600 million for the third quarter, a jump from earlier estimates that it would be down only $100 million as commercial loans continue to decline.

Both executives’ forecasts reflected similar updates given Monday by other U.S. bank leaders. Chief Financial Officer Mark Mason said lower interest income would weigh on third-quarter revenues at his bank, while Chief Financial Officer John Shrewsberry of  said the company’s 2020 interest income could miss previous forecasts by as much as $1.5 billion.