JPMorgan Chase is forecasting an “unmatched” spending spree this year on new initiatives of more than $15 billion, a sign of how America’s largest bank plans to grow even more.
The bank said at its Investor Day on Monday that it plans to spend $15.7 billion on new initiatives in 2023, which would include hiring, marketing and investing in technology. That would be $2 billion more than he spent last year.
“Our investment capability is unmatched,” said Marianne Lake, co-head of the bank’s consumer and community division. Its business unit is expected to spend $7.9 billion on new investments, an increase of $800 million from 2022.
“Our competitors have not and cannot invest at the levels that we do. And these investments represent significant future operating leverage for years to come,” said Lake, who is considered one of the candidates to succeed General Manager Jamie Dimon in the future.
Further sign of a growing bifurcation between large US banks and smaller lenders that have gone under pressure this year, JPMorgan also raised its forecast for how much it expects to earn this year from its lending business following the recent purchase of First Republic.
The bank raised its net interest income target for 2023, excluding its trading division, to around $84 billion from $81 billion previously, due to its agreement for the First Republic. The NII is the difference between what banks pay on deposits and what they earn on loans and other assets.
However, JP Morgan said “sources of uncertainty remain” in the forecast and that its “medium-term” outlook was for NII in the $70 billion range, in part due to a possible need to pay interest rates. higher interest to savers, which would reduce its profit margins.
The increase in guidelines underscores how big banks such as JPMorgan have taken advantage of the recent crisis among some regional lenders, with the company accepting new deposits and buy leftovers of the First Republic in a government auction.
Major lenders have also benefited from the US Federal Reserve raising interest rates last year, allowing them to charge borrowers more for loans without passing significantly higher rates on to savers.
JPMorgan said its deposits, which stood at $2.3 billion at the end of March, were “down slightly” year-over-year. Chief Financial Officer Jeremy Barnum said system-wide deposits at US banks are expected to continue to fall as the Fed tightens monetary policy and customers seek better returns on their Treasury.
“We will fight to retain core banking relationships, but we’re not going to chase every dollar of deposit balances,” Barnum said.
JPMorgan pays 1.21% on average to depositors, below the 1.75% average of its peers, according to data from industry tracker BankReg.
The bank also said that loan losses remained below pre-pandemic levels, but that there would likely be “continued normalization” throughout 2023. It estimated that its net expense ratio at the Company scale – the percentage of its loans that it does not expect to collect debt on – would climb back towards the pre-pandemic average of around 0.6%, up from 0.3% in 2022 and 2021.
JPMorgan’s stock price was down 0.8% Monday in New York at lunchtime.