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Bloomberg
JPMorgan Chase & Co is the most profitable bank in US history. It expects to keep that title with help from the Fed and Donald Trump.
Higher US interest rates engineered by the Federal Reserve and lower corporate taxes spearheaded by the Trump administration translate into about $7 billion more in pretax profit in coming years, JPMorgan said in a presentation. Annual earnings may jump by a third from last year’s high point, based on the lender’s forecasts.
The gains give Chief Executive Officer Jamie Dimon room to plow money into technology investments, 400 new branches and a massive new corporate headquarters on Park Avenue. It also bolsters Dimon’s years-long contention that the bank could accelerate profits once it got more help from monetary policy and politicians.
“Management continues to play the long game and build even bigger competitive moats around each of its businesses,†Glenn Schorr, an Evercore Inc. bank analyst, wrote in a note to investors. The firm is making “investments that some smaller and/or less profitable peers can’t fully do.â€
The bank’s two sources of revenue — net interest income and non-interest fees — may both jump to about $55 billion in 2018, the company said. JPMorgan boosted its outlook for medium-term pretax income to as much as $47 billion from about $40 billion in 2017, and said the US tax overhaul will boost return on tangible common equity up to 3 percentage points.
The more optimistic outlook “appears reasonably consistent with our forecast and entirely consistent with a franchise focused on investment and well positioned for profitable growth,†Credit Suisse Group AG analysts led by Susan Roth Katzke said in a note.
Along with rising interest rates, JPMorgan expects a large windfall from the Republican tax overhaul passed last year. While the bank said last month it would boost wages for some workers and expand branches in response to the tax cuts, much of the benefit will fall to shareholders through higher profits.