JPMorgan sees higher net interest income; return target nears

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(Reuters) -JPMorgan Chase & Co expects its core net interest income to grow to $53 billion in 2022, up $3 billion from its prior forecast, and said it could reach its return target sooner than widely expected.

Chief Financial Officer Jeremy Barnum said on Friday that it is “entirely plausible” the bank could deliver a 17% return on tangible common equity in 2023, a year or more earlier than many analyst models predict.

Barnum said that markets revenue in the first quarter is on course to be better than expected, though still down “a little bit more than 10%” from its exceptional level a year earlier.

Speaking at a conference hosted by Credit Suisse (SIX:CSGN), Barnum mostly addressed JPMorgan (NYSE:JPM)’s financial prospects, but also said “our base case is very positive” on how the U.S. economy will fare with inflation and changes in monetary policy.

JPMorgan shares were up slightly Friday afternoon in contrast to declines in the shares of other big banks.

JPMorgan’s new outlook for net interest income is based on an expectation of six interest rate hikes by the Federal Reserve this year. The prior outlook in January had assumed three to four hikes.

The change follows predictions by analysts that banks will get a significant lift in net interest income in 2022. It builds on JPMorgan’s estimate last month that net interest income from its businesses outside of securities markets would increase 12% to $50 billion this year from 2021.

Barnum said loan growth will contribute to the gains.

The return target is coming into reach partly because JPMorgan is finding “a bunch of offsetting tools” for the higher capital requirements it faces under a mix of changing rules, Barnum said.

“We feel really good about the 17%,” Barnum said.

The outlook for markets revenue is better, Barnum said, partly because of increased volatility in fixed-income trading as markets adjust to expectations for changes in central bank policies that impact short- and long-term rates.

“That type of dynamic global rate environment tends to be quite supportive of the fixed-income business,” Barnum said.

The bank will not spend more than planned on business investments in light of the additional net interest income expected, he said in response to a question.

JPMorgan, which has been getting questions from analysts and investors about its increased spending, has decided to hold an “investor day” conference within the next few months, Barnum said.