[Asia Economy Reporter Byunghee Park] JP Morgan Chase, the largest bank in the United States by asset size, raised its profit forecast for the lending division this year at its first 'Investor Day' event in two years. JP Morgan's stock recorded its highest daily gain since October 2020, leading the rise in other bank stocks and the New York stock market.
According to major foreign media on the 23rd (local time), JP Morgan announced that the lending division's profit this year is expected to increase by several billion dollars from the previous forecast to more than $56 billion. JP Morgan's previous forecast was at least $53 billion.
JP Morgan stated that the Federal Reserve (Fed), the central bank, has raised the benchmark interest rate, and it expects profit expansion as a result. When the benchmark interest rate rises, the interest rate spread between deposits and loans widens, increasing bank earnings.
JP Morgan also said that net interest income (NII) this year will be at least $66 billion. Analysts expected JP Morgan to raise its NII forecast as the Fed raised the benchmark interest rate faster than expected.
JP Morgan's stock surged 6.19%, and other bank stocks such as Bank of America (5.94%), Citigroup (6.07%), and Goldman Sachs (3.20%) also rose together on expectations of increased bank profits.
Chairman Jamie Dimon said that the return on tangible equity (ROTE) target might be achieved next year. Earlier this year, JP Morgan expected it would be difficult to achieve the ROTE target by next year.
JP Morgan CEO Daniel Pinto said that with mergers and acquisitions (M&A) declining, investment banking division fee income is expected to decrease by 45% in the second quarter compared to the same period last year. On the other hand, he said trading division revenue is expected to increase by 10-15%.
Chairman Dimon and executives spent most of the five-hour event explaining the expected profits from the $15 billion new investment reflected in this year's budget.
In January this year, JP Morgan announced a large-scale investment plan of $15 billion, including $6.7 billion in the technology sector. The investment scale far exceeded that of competing banks, surprising investors. JP Morgan shareholders also rejected a one-time bonus payment plan worth $52.6 million for Chairman Dimon at the annual shareholders' meeting on the 17th.
Regarding the large-scale investment plan, Chairman Dimon said, "I hope the process of modernizing JP Morgan's technological aspects will be completed," adding, "There is a lot to be done."
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