When JP Morgan Chase talks, everybody listens.
And Tuesday, what the company had to say about prospects in 2025 disappointed its fans and pushed the Dow lower.
Daniel Pinto, president and chief operating officer of JP Morgan Chase (JPM) , surprised attendees at a New York investor conference by saying that some estimates of Morgan's 2025 earnings are too high.
The key issue: The banking giant's net interest income (NII) in 2025 is likely to be lower than they and the bank expected, he said.
The bank had forecast that NII in 2025 would be as much as $91 billion. Now, faced with the prospect of lower interest rates, Pinto warned that the 2025 estimate is "a bit too high."
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Net interest income is the difference between what a bank pays depositors in interest and earns in interest from loans. It's basically a bank's gross profit.
JP Morgan takes a toll on the Dow Jones
The Federal Reserve is widely expected to cut its key policy rate by at least 0.25%, from 5.25%-to-5.5% to 5% to 5.25% at its Sept. 17-18 meeting.
That would kick off a cycle of more rate cuts, which would, in turn, lead to smaller-than-expected increases in banks' interest income.
On Tuesday, JPMorgan shares closed at $205.56, down $11.25 or 5.2%. The percentage loss was the biggest among the 30 stocks in the Dow Jones Industrial Average, which was off 93 points, or 0.2%, to 40,737.
The loss subtracted nearly 74 points from the Dow. Goldman Sachs (GS) was down 4.4% at $467.13, knocking an additional 142 points from the blue-chip index.
Pinto's announcement pulled financial stocks generally lower. Financial Select Sector SPDR Fund (XLF) fell 1% to $44.49.
The S&P 500 and Nasdaq Composite indexes were higher because of strength in tech stocks.
Banks beat back Fed's Basel III endgame
However, the day was not a total loss for banks.
The Federal Reserve announced it had reduced its plan to force the biggest banks to raise the amount of capital they must hold to protect against losses.
The new increase is expected to be 9%. The Fed had originally proposed a 20% increase. Regulators worldwide have been seeking banks to build more capital to protect the global financial system and guard against the need for taxpayer-backed bailouts.
The 2008-2009 financial crisis and the failures of three larger banks in 2023 shone a very bright light on banks' fragile financial condition.
Banks, led by JPMorgan CEO Jamie Dimon, had fought the Fed on the rules and threatened to sue if the government enacted them.
They argued that the rules would make it harder to extend credit to customers and that the government didn’t offer enough proof that the changes would actually help improve the banking system’s resilience.
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Jamie Dimon calls annual meetings frivolous
That news from the Fed might have cheered Dimon, but the famously blunt CEO had another beef to talk about. He hates annual shareholder meetings.
"Let’s call it what it is. It’s a frivolous waste of time. They are hijacked by special interest groups," he said on Tuesday at an event held by the Council of Institutional Investors in Brooklyn, N.Y. Barrons covered the speech.
Dimon said shareholder meetings don’t promote "serious conversations" about important company or societal issues.
He suggested that regulations allowing anyone with a stake of at least $2,000 in a public company to submit proposals for voting at annual meetings are outdated.
Those remarks drew murmurs from the audience, Barrons noted. CII is an organization that represents large shareholders including public pensions, big unions, foundations, and corporate retirement funds.
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