Banks bludgeoned as JPMorgan says it won’t make as much money as Wall Street hopes next year

The biggest US bank is having its largest one-day drop since June 2020.

Shares of JPMorgan are off about 6.7% as of 12:40 ET after bank President Daniel Pinto warned that Wall Street’s forecasts for the year ahead are too rosy. That’s a worse showing than the bank’s 6.5% decline after reporting earnings in April.

At an industry conference on Tuesday, Pinto said current expectations for 2025 net interest income (the difference between what a bank earns on its loan book and other asset holdings and what it pays out to depositors) are “not very reasonable” and “will be lower” than the $89.5 billion consensus estimate.

A bad day for US financials was not on Tuesday’s bingo card after reports that a planned increase in bank capital requirements is getting watered down.

But the group is at the center of the down day in the stock market, with the Invesco KBW Bank ETF off 3.6% as of 12:40pm ET.

Analysts have been expecting a substantial convergence in earnings growth between the upper echelon of megacap tech and the rest of Corporate America in the quarters to come.

This update from JPMorgan casts doubt on the potential for a broad-based cyclical recovery in earnings. And a closer look at those sturdy profit estimates reveals just how reliant they are on an AI boom that may have reached its best-before date. 

“Overall, fiscal year estimates are holding up better than historical trends would imply,” write Terence Malone and Rob Bate, members of the equity product management group at Barclays. “The resiliency of fiscal year 2024 estimates is still solely attributable to Big Tech; without these six stocks, negative revisions to S&P 500 earnings per share would have been worse than usual at this point in the year.”