JPMorgan wields size advantage as US economic growth slows

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JPMorgan Chase, the largest U.S. bank, expects to benefit from its size and broad array of businesses as interest rates slide and economic growth slows at home and in the rest of the world.

In the past five years, the lender has increased investments into its businesses by $5 billion, taking advantage of rising interest income as rates rose for four straight years. Its consumer business now serves 63 million U.S. households, while the corporate and investment division counts more than 80 percent of Fortune 500 companies as clients.

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Maximizing the benefit of economic growth in the past few years "has positioned us well to face more difficult environments," Chief Financial Officer Jennifer Piepszak said during the company's annual investor day. "We're obviously not immune to cyclical challenges, but our diversification does provide some offsets."

The U.S. economy is likely to grow less rapidly this year, at a rate below 2 percent, than in either 2018 or 2019, mirroring trends in the rest of the world, the bank predicted in materials prepared for the event.

 (AP Photo/Frank Franklin II, File)

"Economic growth has slowed, and the consensus is that growth will slow further, the big question, of course, being when expansion in the U.S. will come to an end," Piepszak said. The current recovery, now in its 11th year, is the longest in U.S. history.

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Net interest income, which reflects what banks charge borrowers after deducting payments to depositors, will probably be hindered by declining rates but remain close to last year's $57.8 billion in 2020 and climb to $60 billion or higher the next year, JPMorgan said.

That's in line with the projections of Saul Martinez, an analyst at the Swiss lender UBS.

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Interest margins have been curbed at banks across the U.S. as the Federal Reserve lowered its benchmark short-term rate 75 basis points to a range of 1.5 percent to 1.75 percent amid economic challenges including slower international growth due to a trade war between the U.S. and China.

JPMorgan, which is building a new headquarters in New York, boosted sales 6 percent last year to $118 billion while continuing to invest in digital banking products that are more popular with customers and cheaper than branch visits or ATM transactions. It also set up a unit focused on venture capital firms backing startup companies and took steps to open jobs for people rebuilding their lives after criminal convictions.

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"Our investments have further strengthened our franchise and ability to outperform, on a relative basis, in any economic environment," Piepszak said. "The underlying economy remains on solid footing," she added, though "risks are probably more skewed to the downside, particularly in the near-term, given uncertain factors like the coronavirus."