JPMorgan maintains key profit goal for next three years

NEW YORK (Reuters) – JPMorgan Chase & Co on Tuesday maintained its key profit goal for its medium-term outlook of three years, according to an investor presentation ahead of its 12th annual investor day.

The bank projected that returns on tangible common equity (ROTCE), a key profit measure for how well banks use shareholder money, will be 17 percent, the same as last year.

Several analysts expected the bank to raise its target as bank executives have shown confidence so far this year about the bank’s competitive position and the macro economic conditions.

JPMorgan shares fell 1.2 percent to $104.80 in premarket trading.

The slide presentation, posted before the conference started, showed that JPMorgan’s outlook dimmed for profits from its Corporate & Investment Bank. It now expects return on equity of 16 percent, down from the 17 percent target a year ago. The investment bank provided one-third of JPMorgan’s revenues in 2018.

The outlook for the Asset & Wealth Management business took a worse turn. The bank expects a 25 percent-plus return on equity in the medium term, down from a target of 35 percent set a year ago. The prior target had been increased from 25 percent two years ago.

Asset managers have been faced with pressure on fees from competitors and index-based automated investing. For JPMorgan, the business accounted for about 13 percent of revenues last year.

Targeted return on equity remained unchanged at 25 percent for the Consumer & Community Banking segment, and 18 percent for the Commercial Banking segment.

The bank stuck with its previous targets of an expense overhead ratio of 55 percent as adjusted expenses were set to rise this year by $2.3 billion, or 3.6 percent.

The higher expense forecast includes $600 million of new investments in technology and $1.6 billion for marketing, front-office hiring, new branches and a new headquarters building.

The additional spending is down from $2.7 billion added a year ago, when it boosted the technology budget by $1.4 billion.