2 Things That Can Pinch JPMorgan's Earnings Growth

Narrow-moat

We continue to expect positive results from JPMorgan, but there are signs of both macro and micro pressures that can slow earnings growth. The interest rate yield curve has remained stubbornly flat with the Federal Reserve having increased the Fed Funds rate 50 basis points since the beginning of 2018 to a range of 1.75% to 2%, but the 10-year Treasury yield has remained fairly range bound between 2.8% and 2.9% since February. This flatter yield curve can restrain net interest income growth, as competition for deposits increases the rate banks pay on deposits, while limiting the yield from banks' longer dated interest earning assets. Besides general rate environment pressure, banks are apparently competing more in certain loan categories like residential and commercial real estate loans. This may keep yields on these loans relatively low, while as the same time stunting loan growth, as JPMorgan becomes more selective.

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