JPMorgan Chase executives have warned that Wall Street's expectations for the bank's performance next year are overly optimistic, causing the stock price to plunge during trading, marking the largest drop in over four years.

On Tuesday, September 10, Eastern Time, JPMorgan Chase's stock initially rose by more than 0.8% at the open, but turned negative in the morning and continued to decline. At midday, it hit a daily low of $200.61, down about 7.5% for the day, the largest intraday drop since June 11, 2020, leading the Dow Jones Industrial Average in losses. It closed down 5.2%, the largest closing drop since April 12, reaching a new low since August 8. Bank stocks closed lower across the board, with Goldman Sachs down about 4.4%, Citigroup down about 2.7%, and Morgan Stanley down 1.6%.

The stock plunge of JPMorgan Chase on Tuesday was attributed by some media to a warning from executives. At the annual financial services conference held by Barclays that day, JPMorgan Chase's President, Daniel Pinto, stated that analysts' expectations for the bank's net interest income (NII) and expenses for the next year are too optimistic. Considering the interest rate outlook with the Federal Reserve expected to cut rates, the current NII forecast of $89.5 billion is "not very reasonable," and "I think that (actual) number will be lower."

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Comments have pointed out that Pinto's remarks were surprising, as two months ago, when JPMorgan Chase released its second-quarter earnings report, the bank's own NII guidance was around $91 billion, and Wall Street's expectation of $89.5 billion was even lower than that.

NII is a major source of profit for banks, representing the difference between the cost of bank deposits and the earnings from mortgages or investment securities. Last year, driven by the Federal Reserve's interest rate hikes, the NII of the four largest U.S. banks soared to a record level. However, with expectations of multiple rate cuts by the Federal Reserve in the coming months, Pinto believes that the positive impact of such favorable conditions is diminishing.

Furthermore, it has been commented that when interest rates fall, the earnings from new loans issued by banks and new bonds purchased will decrease. Lower interest rates will slow the outflow of funds from bank customers' checking accounts and also slow the inflow into money market and other higher-yielding instruments, which from this perspective, helps banks, but also reduces the earnings on new assets, complicating the situation.

Pinto said at the Barclays industry conference on Tuesday: "As interest rates decrease, obviously the pressure on deposit repricing will be reduced, but as everyone knows, we are very sensitive to assets."

Regarding next year's expense expectations, Pinto believes that the analyst's estimate of about $94 billion is "also a bit too optimistic," as inflation persists and JPMorgan Chase is making new investments. "There are many factors that tell us that the expense numbers might be a bit higher than current expectations."

Pinto also stated that JPMorgan Chase's investment banking fees may increase by 15% in the third quarter, and capital markets revenue may be flat year-over-year or grow at most by 2%. Both of his growth forecasts are also below analyst expectations.

Some comments suggest that Pinto's speech has made the outlook for major U.S. banks more pessimistic. The day before Pinto's speech, Goldman Sachs' CEO, Solomon, stated on Monday that Goldman Sachs' trading business revenue is expected to decline by 10% in the third quarter.Before Pinto's speech was heard, earlier this Tuesday, the Federal Reserve's Vice Chairman for Supervision, Michael Barr, stated that the new capital rules for the banking industry would require the largest banks in the United States to increase their capital by 9%, a much lower increase than the approximately 19% proposed in the initial draft of the new rules last year, which was supposed to be a positive for bank stocks, leading to an initial rise in bank stocks on Tuesday.

In addition to Pinto's speech, comments pointed out that on Tuesday, at the same Barclays industry conference, the stance of Ally Financial, a major U.S. consumer auto loan company, also dampened the market. The company mentioned the pressures faced by consumers and their impact on loans, stating that both delinquencies and net charge-offs of auto loans have increased more than expected. Ally Financial's stock price fell nearly 20% at one point during Tuesday's trading, marking the largest drop since March 2020.