JPMorgan sparks bank selloff on interest warning
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The news: JPMorgan Chase shares dropped over 7% on Tuesday, their largest decline in more than four years, after President Daniel Pinto warned analysts’ net interest income forecasts were too optimistic.
The numbers: Speaking at a conference on Tuesday, Pinto said NII estimates for next year of about USD89.5 billion ($134.63 billion) were unrealistic given expectations for interest rate cuts by the Federal Reserve, Bloomberg reported.
Despite a record second quarter, Pinto warned that expectations for 2025 expenses were also too optimistic.
The cautious outlook sparked a selloff across the banking sector, with shares in Goldman Sachs, Citigroup, and Deutsche Bank falling at least 4%, while Ally Financial down 19% in the early afternoon.
The context: Net interest income, the difference between what banks earn from their assets and what they pay on liabilities, hit record highs for the biggest banks last year due to rising interest rates.
Those benefits are fading as multiple interest rate cuts by the Federal Reserve are anticipated in the coming months.
The remarks come amid broader concerns for US banks, with Goldman Sachs forecasting a 10% drop in trading revenue for the third quarter and Ally Financial warning of rising auto loan delinquencies.
The source: Bloomberg
