From CNBC: 2024-09-10 12:45:40

JPMorgan Chase shares dropped 7% after bank president Daniel Pinto warned that expectations for net interest income and expenses in 2025 were too optimistic. Pinto stated that the current estimate for 2025 of $90 billion was not reasonable due to the Federal Reserve cutting interest rates, causing concern among investors.

The stock decline on Tuesday marked the largest drop for the New York-based bank since June 2020. JPMorgan, the largest U.S. bank by assets, has experienced strong growth in net interest income in recent years but is now facing uncertainty with interest rate cuts impacting profitability and investor confidence.

Net interest income is a key revenue source for banks, representing the difference between interest earned from loans and investments and the cost of deposits. Falling interest rates can lead to lower yields on new loans and bond purchases, affecting profitability for banks like JPMorgan.

Pinto also expressed concerns about expenses, with the analyst estimate for 2025 being too optimistic at $94 billion. This is due to lingering inflation and new investments being made by the bank, indicating the need for a more conservative approach in financial outlook and planning to address potential challenges.

Read more: JPMorgan Chase shares drop 7% after bank tempers guidance on interest income and expenses