Shares of JPMorgan Chase (JPM +1.95%), the largest bank by assets in the U.S., had slid roughly 7% as of 12:12 p.m. ET on Tuesday after management essentially lowered its guidance for net interest income (NII), a key source of revenue. NII looks at the difference between what a bank earns on its interest-earning assets such as loans and what it pays out on interest-bearing liabilities such as deposits.
The consensus is "not very reasonable"
The analyst consensus had been modeling roughly $90 billion of net interest income in 2025, according to Visible Alpha, which is now owned by S&P Global Market Intelligence. At an industry conference earlier this morning, chief operating officer Daniel Pinto called the estimate "not very reasonable," although he did not provide specific guidance.
NYSE: JPM
Key Data Points
Pinto also told analysts to expect investment banking fees to climb 15% year over year in the third quarter, while markets revenue could grow 2%. But Wall Street had been modeling for 22% year-over-year growth in investment banking fees and 4% growth in markets revenue, according to Visible Alpha. All of these comments will surely bring analyst estimates down in the coming days.
Is JPMorgan Chase stock a Buy?
After two very strong quarters of NII to start the year, analysts seem to have gotten ahead of themselves, and management at JPMorgan even said on the second-quarter earnings call that it has been over-earning on NII.
Despite the near-term headwinds from lowering guidance, I still like JPMorgan as a long-term stock. It has always been a very well-run company, and management continues to believe it can generate consistent 17% returns on tangible common equity in normal environments, which is one of the best among its peers.
