JPMorgan Chase suffered a major setback as its stock fell 7.5% today following comments made by President Daniel Pinto, which dampened expectations in the market.
Pinto’s remarks, which were compared to Elon Musk’s famous 2020 tweet regarding Tesla, suggested that Wall Street might be too optimistic about the near-term performance of the bank.
Investors were shocked by the unexpected announcement, which led to JPMorgan stock’s largest one-day decline since June 2020.
Pinto warned in a way that undermined confidence.
The expectations for the NII are too high. The next year will be more difficult.
The bank’s Net Interest Income (NII) is the difference between the amount it earns from lending and the interest that the bank pays depositors.
The revelation indicated that the previously impressive financial performance of the bank could be slowed down and a sell-off would occur immediately.
Pinto’s comments echoed Elon Musk’s tweet from 2020, where the Tesla CEO said that Tesla’s stock price was “too expensive,” resulting in an 11% decline.
The short sellers who were struggling against Tesla’s stock’s rising price saw this as an opportunity.
Pinto’s honesty was a shock for JPMorgan investors. It caught them by surprise, just like Musk’s Tweet.
Fed is responsible for the fall in banking stocks
Pinto’s comments were not the sole cause of market decline.
JPMorgan and the banking industry as a whole were affected by the news that the Federal Reserve was reorganizing its regulatory framework.
Fed revised its updated capital rule draft, originally requiring US lenders to raise capital by 19.5%, to just 9%.
Even this lower figure was still below market expectations and heightened investor concerns.
JPMorgan, as one of the biggest banks in the US was especially hard hit by the new regulations.
Pinto’s warning and the regulatory pressures that followed created the perfect storm which led to the drastic fall of the stock.
JPMorgan’s next-year forecast
Pinto’s caution is particularly significant, as it challenges JPMorgan’s financial forecasts.
The bank’s president believes that the $91 billion Net Interest income forecast four months ago was too ambitious.
The bank did not provide a revised number, but the suggestion that the NII was lower than expected has caused investors to be alarmed.
JPMorgan’s Q3 forecast for investment banking fees is 15% higher than analyst estimates. Market revenue will also increase by 2%.
Goldman Sachs’ CEO David Solomon, for example, has predicted a 10% drop in trading revenue, which is a grim outlook for the entire sector.
Wall Street is not satisfied with JPMorgan’s performance.
Investors are advised to pay attention to Pinto’s remarks, since he’s widely considered to be the most likely successor of current CEO Jamie Dimon.
The bank’s management may be changing its approach to the increasingly complex financial environment as a result of his realistic assessment.
Investors are wondering if JPMorgan can live up to or even exceed their expectations this year as it prepares for an easing cycle by the Federal Reserve that could slow down the growth in interest income.
Pinto’s honest remarks are a warning, and Pinto urges caution on a market which has grown increasingly unreliable.
As new information becomes available, this post JPMorgan’s stock plunges 7.5% following president Pinto’s “Elon Musk Moment” may be updated.
