Savings following a U.S. tax cut, investments in digital platforms, favorable economic conditions and rising interest rates should bolster JPMorgan Chase & Co.'s earnings this year and beyond, executives said during the company's annual investor day Feb. 27.
The company said in a presentation accompanying executives' remarks that it looks for annual pretax net income to increase from just under $40 billion in 2017 to a range of $44 billion to $47 billion over the next three years.
Benefits from a U.S. corporate tax reduction passed late in 2017 — the top rate was brought down to 21% from 35% — are expected to include a bottom-line boost. That, on top of economic vigor feeding loan growth and higher rates lifting interest income this year, factored into the banking giant updating its targeted return on tangible common equity to 17% in coming years, up from 15%.
The target "is a good base case in two to three years," CFO Marianne Lake said. She added that the bank also projects rising fee income in that period.
JPMorgan CFO Marianne Lake
JPMorgan, the largest U.S.-based bank by assets, said that over time tax benefits will get baked into earnings and boosts from rising rates will wane as deposit costs will gradually rise. But rapidly evolving technology that enables tech-savvy banks to efficiently reach more customers with more services should bolster JPMorgan's abilities to deepen business ties with existing customers and help it attract more clients, Lake said.
"We have seen mass adoption of all things digital," Lake said.
While Lake said JPMorgan would maintain positive operating leverage — keep revenue levels above expenses — the bank is investing heavily in innovation and expects noninterest expenses to reach nearly $62 billion this year from about $58.5 billion in 2017.
She said the bank is developing and rolling out several new products and services every year. The company recently added a service that enables consumers to open online accounts in four minutes or less, and another that allows investors to safely trade securities on their mobile devices. Similar services are developing across JPMorgan's commercial and corporate services, Lake said.
Swift and convenient digital payments services — across all business lines — are rapidly evolving and central to tech-driven banks winning market share this year and in years to come, Lake said. That is because everyone from consumers who want to split bills at restaurants to global corporations that work with other businesses in various countries are increasingly demanding easy-to-use and safe payments options.
"Payments are at the heart of being deeply integrated with our customers," Lake said. Disruption in payments is well underway, and Lake added, "We are embracing that."