What happened
For the week, shares of JPMorgan Chase (JPM -0.40%) traded roughly 10% higher as of 12:52 p.m. ET Thursday after the bank raised its outlook for the year at its investor day held earlier this week.
So what
The bank now expects to generate roughly $56 billion of net interest income (NII) in 2022, which is the profit banks make on loans, securities, and cash after covering the cost to fund those assets. NII is one of the main sources of revenue for a bank. Previously, JPMorgan Chase had only expected $53 billion of NII for the year.
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Furthermore, JPMorgan said it expects to hit a run rate in the fourth quarter that implies annual NII of $66 billion, which management said is a good "launch point" for 2023.
JPMorgan also said it expects capital markets revenue in its corporate and investment banking division to come in 15% to 20% in the second quarter, compared to Q2 2021. This is because of the intense market volatility that has ensued this year, which is when trading revenues tend to shine.
All of this has led management to believe they could generate a 17% return on tangible common equity (ROTCE) this year, a return management previously believed was out of reach.
During the investor day, JPMorgan's CEO Jamie Dimon said:
We have a strong U.S. economy, fueled by monetary and fiscal stimulation that you've never seen before. So it's different than a strong economy. And the consumer is in very good shape even today, which means if we go in a recession, it may be different than prior recessions.
"We don't know the outcome," Dimon added, referring to all of the market forces which have created intense market volatility and led experts to believe the economy could tip into a recession in 2023.
Now what
Investors are clearly cheering the revised outlook for NII, trading revenue, and ROTCE targets. These still depend on the Fed continuing to raise interest rates and some modest loan growth, but nearing the six-month mark for the year, management should have a good line of sight for the rest of the year despite the lingering uncertainty.
