JPM JP Morgan Chase and Co

By Emily Glazer 

JPMorgan Chase & Co. says it is optimistic about 2018 and the impact the new U.S. tax law will have on its financial outlook.

The largest U.S. bank by assets shared new targets and expectations in its annual investor day presentation Tuesday, which for the first time included benefits from changes to the tax law.

Most notably, JPMorgan moved its medium-term target -- over the next two to three years -- for return on tangible common equity, a key profitability metric, to roughly 17% compared with its prior target of 15%. That is in line with Credit Suisse analyst Susan Katzke's 15% to 18% expectation, she wrote in a Tuesday research note. Excluding tax reform, the bank said its return on tangible common equity target over the next two to three years would be around 15%.

Already, the bank's traders are off to a strong start this year. Daniel Pinto, the bank's co-president and head of its corporate and investment bank, said trading is expected to rise "mid to high single digits" in the first quarter of 2018 compared with the same period last year. He added that activity in the beginning of 2018 has been "strong" and that "markets are correcting quite fast after the selloff" earlier this year.

Still, the bank noted "significant uncertainty around how competitive dynamics evolve," and wrote that it expects "some benefit to pass to customers over time," according to its presentation for investor day, which was at the company's Park Avenue headquarters in Manhattan.

The bank's chairman and chief executive, James Dimon, said his biggest worry at the moment is the impact of policy and geopolitics. "Brexit will have an effect...[and is] damaging to countries," he said. He said other geopolitical surprises "will catch us the most off-guard" compared with interest-rate moves.

Finance Chief Marianne Lake, who spearheaded the presentation for the first year, said each of the bank's main businesses -- consumer banking, corporate and investment banking, commercial banking and wealth and asset management -- has increased medium-term targets "reflecting tax reform but also reflecting growth."

The largest U.S. bank by assets said its medium-term, pretax income is expected to increase to a range of $44 billion to $47 billion from $40 billion in 2017. JPMorgan also expects around 7% noninterest revenue growth in 2018 and 3% compound annual growth rate going forward, depending on market conditions.

The New York bank also said its capital ratio is expected to fall to 11% to 12% in the "medium-term" from 12.1% currently.

Total costs also are expected to rise to around $62 billion in 2018 from $58.5 billion in 2017. The 2018 figure includes $10.8 billion in technology spending and $5.7 billion in marketing costs.

Mr. Dimon also weighed in on JPMorgan, Berkshire Hathaway Inc. and Amazon.com Inc.'s new health-care initiative, which he said will "at a minimum have a much better outcome for our people...probably lower costs...and at a maximum probably do something better for the country overall."

Ms. Lake said she's hopeful about "more constructive regulatory backdrop" and added that the bank's "investing capabilities are limited only by the opportunities in front of us and our ability to execute against them."

Write to Emily Glazer at emily.glazer@wsj.com

(END) Dow Jones Newswires

February 27, 2018 13:50 ET (18:50 GMT)

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