JPMorgan Chase stock just had its worst drop in 4 years after warning of lower 'net interest income'

JPMorgan Chase (JPM+0.83%) stock plunged almost 7% Tuesday afternoon, its biggest dip in more than four years, after the bank’s president warned that its current net interest income projections for next year are too high.

JPMorgan President Daniel Pinto said that the $90 billion projected NII for next year “is not very reasonable” thanks to the incoming interest rate cuts. Net interest income, or NII, is a measure of how much interest banks earn on loans and investments — the key way banks make money.

“I think that that number will be lower,” Pinto said at the Barclays (BCS+1.33%) Global Financial Services conference Tuesday. “We are not going to guide on that now, but the $90 billion is a bit too high.”

The Federal Reserve is largely expected to lower interest rates when its decision-making arm, the Federal Open Market Committee, meets on Sept. 17-18. The central bank is expected to drop rates by 25 basis points or 50 basis points.

“Clearly, as rates go lower, you have less pressure on repricing of deposits,” Pinto said. “But as you know, we are quite asset sensitive.”

JPMorgan is the largest U.S. bank by assets, with $3.7 trillion in assets under management as of June 30 — a 15% yearly increase, driven by higher market levels and continued net inflows, the bank said in its second-quarter earnings report. It brought in $22.9 billion of NII for the quarter.

JPMorgan shares traded at $201.74 Tuesday, after the stock posted the largest intraday fall since June 2020, according to FactSet (FDS+1.58%).

Despite the more cautious NII outlook, Pinto is still optimistic about the bank’s results in the years to come.

“The performance of the company in the long term, it will be great,” Pinto said. “The performance of the company next year will be very good too. But the NII expectations are going to be too high.”