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Deposit growth accelerates at JPMorgan as price competition eases

JPMorgan Chase & Co.'s deposit growth has picked up as rate competition has abated after three Federal Reserve cuts, according to CFO Jennifer Piepszak.

"Higher-yielding alternatives are less attractive, and we are seeing an increase in deposit growth," Piepszak said at a conference. "Assuming the rate environment holds, I would expect that to carry into 2020."

Piepszak said JPMorgan brings "a lot to the table beyond price" in the form of its sophisticated digital capabilities, physical branch reach and product breadth. The bank had declined to compete on rate early in 2019 before the Fed started easing and ceded deposit growth as a result, she said.

"That was the first time in the rising rate cycle that we saw a strong correlation between rate paid and deposit growth," she added.

Piepszak's comments echoed remarks by Bank of America Corp. CFO Paul Donofrio, who said in October that his bank's competitive proposition for depositors might also be enhanced in a lower rate environment.

Overall, JPMorgan's cost of deposits has continued to "tick up," Piepszak said, as customers shift from savings accounts to certificates of deposits, even though CD rates have fallen.

Piepszak reiterated the bank's guidance that its deposit costs are symmetric, with little room to fall because they never increased much when rates were rising. However, she said price cuts for commercial depositors accelerated after the Fed's second cut, even as the bank moves cautiously.

"On the wholesale side, the pricing is client by client," she said. "So we're not going to lose valuable client relationships over a few ticks."

Piepszak also said JPMorgan's outlook for net interest income has improved since October as long-term interest rates have increased, the yield curve has steepened and balances have grown. "We expect to be a few hundred million [dollars] higher in the fourth quarter" than the forecast of about $14 billion for the period that the company gave in its third-quarter earnings report.

Earlier at the same conference, Wells Fargo & Co. CFO John Shrewsberry also said the more hospitable interest rate environment had created an "incremental opportunity from an earnings perspective."