J.P. Morgan provides economic and guidance update at Barclays conference
2min read At the Barclays Financial Services conference, JPMorgan Chase executives provided valuable insights into the state of the global economy and the bank’s performance across key areas. In terms of the U.S. economy, they acknowledged that while some slowdown is apparent, the consumer remains a key driver of growth. Despite the recent rise in unemployment rates, consumption, particularly non-discretionary spending, continues to grow, supported by wage growth outpacing inflation. They also noted that excess savings accumulated during the pandemic have largely been spent, especially in lower-income segments. Nonetheless, the consumer’s financial position remains solid.
Regarding international economics, the executives highlighted concerns about geopolitical risks, particularly the tensions between the U.S. and China, which have CEOs exercising caution in their investment decisions. While business sentiment is generally stable, uncertainty surrounding geopolitical events and elections is affecting the pace of corporate activity, including mergers and acquisitions (M&A). Despite this, JPMorgan remains optimistic about international growth, especially in areas where they’ve expanded their presence, such as Europe, where they are focusing on digital banking and wealth management.
In terms of trading revenue, the bank expects third-quarter markets revenue to be flat to up by about 2% year-over-year. Fixed income has seen some weakness, particularly in rates, but equities, especially derivatives, have performed well. They believe that consolidation in the trading wallet will benefit them in the long term as smaller players struggle with the low-return environment. Investment banking, on the other hand, is projected to have a strong quarter, with fees expected to rise by approximately 15% compared to the third quarter of last year. This growth is driven by increased activity in capital markets, particularly in institutional loans and leveraged loans.
Net interest income (NII) remains a focal point, with guidance for 2024 tracking toward approximately $91 billion, in line with market expectations. However, they acknowledged that the consensus for 2025, which anticipates a slight decline in NII due to lower interest rates, may be too optimistic. They signaled that lower rates will likely put pressure on NII next year, although they expect to manage this impact by leveraging their asset-sensitive balance sheet. Despite potential challenges, JPMorgan remains confident in its ability to generate strong NII over the long term.
Expenses were another topic of discussion, with executives indicating that current expense estimates of $92 billion for 2024 are reasonable. They also acknowledged that investments in technology, particularly artificial intelligence (AI), will continue to be a key focus. AI is expected to generate substantial savings and efficiencies across the organization, potentially contributing up to $2 billion in benefits this year alone. These savings will help offset some of the rising costs associated with the expansion of various business lines.
Energy lending was briefly touched upon, with JPMorgan reaffirming its commitment to financing energy transition projects. CEO Jamie Dimon emphasized the importance of supporting companies like Exxon as part of a broader strategy to help the U.S. and its allies meet their energy needs. This aligns with the bank’s broader approach to managing environmental risks and opportunities while maintaining a robust energy lending portfolio.
Lastly, JPMorgan addressed concerns about rising credit issues, particularly in consumer credit. While revolving credit balances have recovered to about 25% above pre-pandemic levels, the number of consumers carrying revolving balances remains below pre-pandemic levels. The bank expects this to normalize over time, which should support future growth in its credit card business. However, they remain cautious about the potential for further credit deterioration, especially in the context of a weakening economic environment.