JPMorgan Chase plans to spend more than $15bn on new initiatives in this year, an amount that is “unmatched”. This is a sign that the biggest US bank wants to become even bigger.
At its Investor Day on Monday, the bank announced that it would spend $15.7bn in 2023 on new initiatives, including hiring, marketing, and investments in technology. This is $2bn higher than what it spent in the previous year.
Marianne Lake, cohead of the Consumer and Community Division at the Bank, said: “Our ability to invest is unmatched.” Her business unit will spend $7.9bn in new investments by 2022, up $800mn.
Our competitors cannot and will not invest as much as we do. These investments will provide significant operating leverage in years to come,” said Lake. He is considered as a candidate to succeed Jamie Dimon, the chief executive officer.
JPMorgan has raised its forecast for the amount it expects to earn from its lending activities this year following its recent acquisition of First Republic. This is a sign that the US banking industry is becoming more divided between the larger US banks and smaller US lenders who have been under pressure in the past year.
A result of the agreement for First Republic, the bank increased its target for 2023 net interest income to approximately $84bn, up from $81bn. Net interest income is calculated as the difference between deposits paid by banks and their earnings from loans and assets.
JPMorgan stated that “sources for uncertainty” remain in the guidance. It also said its “medi-term” forecast was net interest income of the mid-$70bn, partly because it would eventually need to pay higher rates of interest to savers. This would shrink the profit margins.
JPMorgan’s shares ended Monday 0.8 percent lower.
Dimon warned that the rates could rise further.
I think there is a chance that bond rates will tick up, and not just to 3.78 percent. He said he was talking about 4,25, 4.5 or 5, 6, maybe even 7.
The company’s increased guidance showed how JPMorgan has benefited from the recent financial crisis in some regional banks, taking on new deposits and purchasing the remaining First Republic shares in a government-sponsored auction.
The US Federal Reserve raised interest rates in the last year. This allowed large lenders to charge more to borrowers for loans, without having to pass on higher rates to their savers.
JPMorgan reported that its deposits totaled $2.3tn by the end of March. This was “down slightly” from last year. Chief Financial Officer Jeremy Barnum stated that the Fed’s tightening of monetary policy would lead to a continued decline in system-wide US bank deposits. Customers will also be looking for better returns on their cash.
Barnum stated that “We will fight for primary banking relationships, but we won’t chase every dollar in deposit balances.”
According to BankReg, JPMorgan pays an average of 1.21 percent to its depositors – lower than the average 1.75 percent paid by its peers.
Dimon has also stated that he intends to remain as the chief executive of the bank for the near future. He has led the institution since 2005. Morgan Stanley’s James Gorman said last week that he would be stepping down from his position within the next year.
Dimon replied “three and half years” when asked how long he wished to remain. He then added: “I cannot do this forever.” I’m aware of that. I know that. But my intensity remains the same. “I think I should leave if I don’t feel that intensity.”