JPMorgan Chase & Co. said it expects to spend much of the windfall from higher interest rates on technology investments and expanding its branch network as the firm laid out its goals for 2019.

The bank’s most significant financial targets remained unchanged from last year, including a 17 percent return on tangible equity, according to a presentation Tuesday before the bank’s investor day in New York. It also said to expect slower loan growth.

Key Takeaways

The bank expects net interest income to climb by an additional $2.5 billion in 2019 as the lender benefits from higher rates. The Federal Reserve raised its benchmark rate four times last year but has signaled it could slow down this year. JPMorgan said overall expenses could jump by more than $2 billion to around $66 billion in 2019 as it expands into new states for the first time in more than a decade and constructs a new headquarters in New York. The bank said its technology budget would increase by $600 million to about $11.4 billion, solidifying JPMorgan’s spot as a top spender in the tech arms race among financial firms. The bank told investors to expect slower loan growth as it shows a “focus on high-quality loans.” Some observers have worried about the turn of the credit cycle as rates rise, but JPMorgan said it expects net charge-offs to remain relatively flat across most loan products in 2019.

Market Reaction:

“Coming in to today, the investor debate was around expenses,” Susan Katzke, a bank analyst at Credit Suisse Group AG, wrote in a note. “That may well continue, though we expect presentations to translate to confidence in the merit of the investments and the achievability of a 17% ROTE.” Shares of the company dropped 1.2% to $104.85 in early New York trading at 8:23 a.m.

Published Feb 26, 2019, 8:37:01 AM, by Michelle F. Davis (Bloomberg)