NEW YORK, April 12 (Reuters) – The uncertain trajectory of interest rates is making it hard for U.S. banks to forecast profits and leading some to adopt a cautious stance for the remainder of the year.
“People know interest rates are uncertain but rate changes have a faster effect on banks than other sectors,” said JJ Kinahan, CEO of brokerage IG North America.
Item 1 of 3 A customer walks out of a branch of the JPMorgan Chase & Co bank in New York, March 15, 2013. REUTERS/Lucas Jackson/File Photo
“You’ve got to be prepared for a range of outcomes, which we are,” said Jamie Dimon on the analyst call. “All of these questions about interest rates and yield curves… We don’t want to guess the outcome. I’ve never seen anyone actually positively predict a big inflection point in the economy literally in my life or in history.”
Teddy Oakes, investment analyst at T. Rowe Price said there was little benefit to banks of “sticking your neck out early in the year” and being too optimistic on NII, as higher expectations had already been priced in.
, net interest income increased 1% year-on-year. The bank forecast that NII excluding markets would be down modestly, as growth would be from noninterest-bearing revenue. Citi CFO Mark Mason said on a conference call that the fewer rate cuts expected this year don’t “have a material impact” on the bank’s guidance.
“Notwithstanding a supportive higher-for-longer rate environment, early indications are that banks will mostly maintain their relatively downbeat 2024 net interest income guidance,” said Mark Narron, senior director at Fitch Ratings.
Banks were generally positive on the economy, with Dimon saying the economy remained strong with people having excess money to spend.
“There’s no doubt the Fed’s policy of very high short term rates impacts banks,” said Rick Meckler, partner, Cherry Lane Investments. “The surprise has always been that the economy hasn’t slowed, and so much of bank earnings are tied to economic conditions.”
Get a look at the day ahead in U.S. and global markets with the Morning Bid U.S. newsletter. Sign up here.
Reporting by Saeed Azhar, Noor Zainab Hussain, Manya Saini, Niket Nishant, Nupur Anand, Sinead Carew, Tatiana Bautzer, Manya Saini; Writing by Megan Davies; Editing by Nick Zieminski
Our Standards: The Thomson Reuters Trust Principles.
