President and Chief Operating Officer Daniel Pinto cautioned that analysts’ expectations for the $4 trillion-asset bank’s revenue and expenses next year are “not very reasonable,” as interest rate cuts weigh on the company’s interest income and costs continue to rise as a result of inflation.
Though Pinto said the consensus estimates for 2025 — $90 billion in net interest income and $93.7 billion on expenses — are off, he declined to offer
Pinto explained that as rates fall, the bank’s loans are expected to reprice more quickly than its deposits.
He added that the bank’s expenses will be higher than they are in Wall Street’s calculations because inflation is still impacting
“So the process of modernization of the technology stack — going to the cloud, going to the new data centers, refactoring applications, having a technology stack that is modern and effective and efficient that allows us to deliver more with the dollars of investment — that agenda requires a lot of work,” Pinto said. “We’ve made a huge amount of progress, but it’s still a long way to go.”
The unexpected update on 2025 came as Pinto reiterated the company’s 2024 guidance.
Scott Siefers, an analyst at Piper Sandler, wrote in a note that most other banks’ mid-quarter updates have been more benign than
“While we understand the negative knee-jerk reaction, the swoon seems overdone,” Siefers wrote in reference to
Despite Tuesday’s wobble,
“Thus, it stands to reason that some uncharacteristic negative guidance would be poorly received,” he wrote. “Nevertheless, from our standpoint, the outlook from management is likely conservative.”
Fed Vice Chair for Supervision Michael Barr
The Fed’s proposal, written in partnership with the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency, has been a major point of contention in the industry, especially among megabanks like
Still, the potential capital relief didn’t protect
Many other banks also saw their stock prices fall on Tuesday.
Two already-beleaguered banks — New York Community Bancorp and First Foundation — saw further falls of 7.8% and 7.1%, respectively.
The KBW Nasdaq Bank Index was down 1.8% on Tuesday.