J.P. Morgan Chase (JPM.US) warns that next year's costs will exceed 100 billion dollars to “shock” the market, the biggest decline in eight months
The Zhitong Finance App learned that Marian Lake of J.P. Morgan Chase (JPM.US) said that the bank's expenditure is expected to reach 105 billion US dollars next year. This outlook exceeded analysts' expectations and caused its stock price to fall on Tuesday.
Lake said at a Goldman Sachs Group meeting on Tuesday that the biggest driver of expected cost increases is “expenses associated with business volume and growth.” She also pointed out strategic investments and the “structural impact of inflation”.
On Tuesday, J.P. Morgan's stock price in New York fell 4.7% to $300.51, the biggest drop in eight months. This makes the bank the worst performing constituent stock in the KBW Bank Index.
This guidance was even higher than analysts' highest expectations and surpassed the average estimate of $101.1 billion. The cost of around $105 billion will also be about 9% higher than analysts' expectations for 2025. The bank's non-interest expenses for the first nine months of this year increased 4% compared to the same period in 2024.
Lake said that the consumer and community banking business she is in charge of is the “main driver” of spending growth. She cites motivational pay for financial advisors, product marketing, network building, and investments in artificial intelligence as examples of increased spending.
Investors were shocked by Tuesday in the same way as in 2022, when the company's cost guidelines led to a drop in stock prices. The backlash that followed prompted CEO Jamie Dimon and his team to hold an Investor Day event to provide more explanation about their spending plans, which ultimately appeased shareholders.
Wells Fargo analyst Mike Mayo said in a Tuesday report that higher spending may help America's largest bank deepen its competitive advantage, but he warned that this is “negative” news for the industry as a whole because “other banks may need to spend more to compete for market share, creating a domino effect.”
Trading business outlook
Lake said that for the fourth quarter of 2025, investment banking fees may increase by a “lower single-digit percentage” compared to the same period last year. Analysts had anticipated a 6.3% increase. Meanwhile, Lake said transaction revenue could grow by a “low double-digit percentage” — which exceeded analysts' expectations. In the first nine months of this year, the bank's investment banking fees increased by 11%, and transaction revenue jumped 20%.
The initial impulse of the “animal spirit” inspired by Trump's election last year gradually subsided due to tariff announcements, but willingness to trade resumed in the third quarter and continued until the last three months of this year.
Goldman Sachs Chief Financial Officer Dennis Coleman said earlier on Tuesday that this is likely to be the “second-largest year ever” in which the merger and acquisition deal has been announced. He added that the long-awaited boom in private equity deals has finally arrived.
Meanwhile, competitor Citigroup is expected to experience a higher-than-expected increase in investment banking fees in the fourth quarter, and the bank is seeking to capitalize on the gradual recovery in trading activity. The bank's financial director Mark Mason said on Tuesday that his bank expects investment banking fees to increase by about 25% this quarter, which is significantly higher than analysts' average expectations.
Mason's guidance on market business remains unchanged, and predicts that revenue will drop by a lower to a medium single-digit percentage compared to the same period last year.
As for the broader US economy, Lake of J.P. Morgan Chase said that consumers and small businesses appear to be in good health, but the environment is “slightly vulnerable.”
Lake said, “Although inflation has declined and the ability to withstand additional pressure has declined,” “the cash buffer has returned to normal, and the price level is definitely high.”