JPMorgan’s earnings beat forecasts, but rate cuts cut into its outlook

Posted at 7:30 AM, Jul 16, 2019
and last updated 2019-07-16 10:04:30-04

JPMorgan’s second-quarter earnings were better than expected, but the company slightly downgraded its outlook on the Federal Reserve’s expected interest rate cuts.

JPMorgan highlighted strength in its consumer and community banking business.

However, the bank also cut its expected 2019 net interest income — the gap between what banks make on loans and what they pay on deposits — blaming the downgrade on the anticipated interest rate cuts by the Federal Reserve. The exact expected net interest income depends on the number of cuts, the bank said, because that will affect rates on financial products like loans and mortgages.

On an earnings call, CFO Jennifer Piepszak said JPMorgan expects up to three central bank rate cuts this year. If the Fed cuts only once, net income for the year should be more than $57.5 billion, Piepszak said. But with any more cuts, JPMorgan expects net interest income to come in below that threshold,

The bank reported earnings per share of $2.82, beating the previous quarter as well as last year’s performance during the same period. Analysts had expected $2.50 earnings per share.

Revenue rose 4% to $29.6 billion, which the bank attributed to balance sheet mix — namely higher total loans and average deposits — and the impact of higher interest rates.

Shares slipped 1.9% in premarket trading.