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KEY TAKEAWAYS
- JPMorgan Chase is set to report earnings for the first quarter before the bell Friday.
- The largest U.S. bank is expected to report that net interest income slipped from an all-time high in the fourth quarter.
- The bank is prepared for higher rates and challenging economic conditions, CEO Jamie Dimon told shareholders earlier this week.
JPMorgan Chase (JPM) is set to release earnings for the first quarter before the bell Friday, with the largest U.S. bank expected to report a decline in non-interest expenses that could help it offset a slight drop in net interest income on a quarter-to-quarter basis.
The bank is expected to post net income of $12.57 billion, or diluted earnings per share of $4.13, according to analyst estimates compiled by Visible Alpha. That’s little changed from the year-ago quarter, though its seasonally higher than $9.31 billion in net income and $3.04 diluted EPS it reported for the fourth quarter of 2023.
The bank’s revenue is expected to grow 7.6% over the year-earlier period to $41.26 billion, likely supplemented by higher transaction revenues as stock markets rallied.
| Analyst Estimates for Q1 2024 | Q4 2023 | Q1 2023 | |
| Net Revenue | $41.26B | $38.57B | $38.35B |
| Diluted Earnings Per Share | $4.13 | $3.04 | $4.10 |
| Net Income | $12.57B | $9.31B | $12.62B |
Key Metric: Net Interest Income
JPMorgan’s net interest income reached an all-time high of $24.18 billion in the fourth quarter. But it likely slid to $23.28 billion in the first quarter as the bank’s net interest margin probably fell to 2.76% from 2.81%, according to estimates from Visible Alpha.
Still, that would mark a 12% increase from $20.83 billion in the first quarter of 2023, as interest income has increased substantially post-pandemic in the higher interest-rate environment.
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Stickier-than-expected inflation, which was reaffirmed with Wednesday’s release of consumer price data, has dashed hopes that the Federal Reserve will cut interest rates any time soon. Fed officials have said repeatedly that they need more confidence inflation is under control before trimming the central bank’s benchmark rate, which is at a 23-year high.
JPMorgan CEO Jamie Dimon told investors in his annual shareholder letter earlier this week that the bank is prepared for a higher interest rate scenario.
“We are prepared for a very broad range of interest rates, from 2% to 8% or even more, with equally wide-ranging economic outcomes—from strong economic growth with moderate inflation (in this case, higher interest rates would result from higher demand for capital) to a recession with inflation; i.e., stagflation,” Dimon wrote.
From the point of the view of the economy “the worst-case scenario would be stagflation, which would not only come with higher interest rates but also with higher credit losses, lower business volumes and more difficult markets,” he added.
The preparedness Dimon highlighted might provide some good news for JPMorgan’s investors. The bank may be in a better position than its peers when it comes to deposit costs, say some analysts.
JPMorgan “is taking a more conservative stance with respect to near-term deposit repricing expectations,” Bank of America analysts wrote, explaining that while other banks are expecting deposit costs to ease after the Fed begins cutting rates, JPMorgan “sees competition for retail deposits, along with continued mix shift, potentially exerting upward pressure on deposit costs.”
JPM shares fell 0.9% Wednesday to close at $195.47 amid a broader downturn for U.S. equities. The stock has gained about 50% in the past 12 months.