JPMorgan CFO Lake Says Revenue, Costs Probably Flat for 2016by
Bank is likely to post $56 billion in expenses, Lake says
No adjustment on energy reserves in response to higher oil
JPMorgan Chase & Co. expects revenue and expenses to remain about unchanged from last year as the bank waits for the benefit of higher interest rates and plows cost savings into investments, Chief Financial Officer Marianne Lake said.
Expenses will come in at around $56 billion while revenue will roughly match last year’s level, Lake said Tuesday at an investor conference in New York. She reiterated JPMorgan’s forecast for second-quarter trading revenue to grow by a percentage in the ‘mid-teens’ from the same period a year ago.
“If I look at overall revenues year-over-year, they are more flat,” Lake said. “That’s because the upside that we’ve got in markets is offset by lower fees in CIB, and lower asset-management and card,” she said, referring to the corporate and investment bank.
JPMorgan isn’t immune to the low interest rates sapping the industry’s revenue despite its rank as the nation’s biggest bank, which Lake touted as an advantage. Led by Chief Executive Officer Jamie Dimon, the company is digesting new regulations and capital rules, and navigating volatile markets that include an oil-price rebound after a sudden plunge, she said.
The bank hasn’t changed its outlook for energy loan-loss reserves for the rest of this year even with higher oil prices, according to Lake. While the rebound may keep more companies from becoming stressed, it hasn’t helped those that are already in trouble, she said. Exploration and production firms are still conserving cash, which continues to starve oilfield-services companies, she said.
“There’s no doubt that $50 oil is better,” she said. “Unfortunately, it has yet to materially change the cash-flow profile of the industry.”
The Federal Reserve plans to make changes to its annual stress tests that will penalize Wall Street banks for being large and complex. While that was largely expected, other adjustments may help offset the increased capital needs, such as a halt to share repurchases during times of stress, she said.
“Depending on what the choice of those offsets are,” she said, “they could be very meaningful.”