JPMorgan’s (JPM Quick QuoteJPM - Free Report) consumer and community banking unit’s co-CEO, Jennifer Piepszak, believes that consumer deposits will be “slightly down from here.” As the Federal Reserve is expected to keep interest rates high and the Treasury Department tries to replenish the treasury general account following the banking crisis, growth in consumer deposits seems challenging.

As digital-only banks have started to offer rates that the traditional banks cannot match, the competition for deposits has escalated.

Because of the rise in interest rates, consumers are moving their money into money market funds for greater returns, which is now another major problem for regional banks.

Notably, the Federal Deposit Insurance Corporation reported that banks’ overall deposits declined by $472 billion in the first quarter of 2023 (the worst decline in almost 40 years).

However, despite the above-mentioned headwinds, Piepszak has expressed confidence in the bank’s ability to “win the war for customers” as JPM added 2 million checking accounts on a net basis across its consumer and business banking in 2022. Moreover, the bank remains on track to complete at least that amount this year.

Along with a decline in deposits, JPMorgan expects demand for loans to be low in the near term.

The bank’s president and chief operating officer, Daniel Pinto, believes that the demand for loans is declining amid expectations of an economic slowdown/recession.

Pinto said, “There is no doubt that regional banks and smaller banks are building up liquidity, building capital, so they are lending a bit less. I don't think that the big banks have really changed their lending standards... there is not a huge amount of loan demand in the first place.”

In the first quarter of this year, banks witnessed a rise in their interest incomes and margins, supported by growth in loan balances and higher interest rates. While interest rates are expected to remain high in the near term, loan growth will likely slow down a bit because of lower consumer spending.

Over the past six months, shares of JPM have gained 9.2% against the industry’s fall of 3.4%.
 

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Currently, JPMorgan sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Amid the current challenging economic environment, most banks are providing bleak near-term outlook.

Recently, at the Morgan Stanley U.S. Financials, Payments & CRE Conference, KeyCorp (KEY Quick QuoteKEY - Free Report) presented weaker-than-expected net interest income (NII) second-quarter guidance.

KEY’s CEO Chris Gorman noted that NII will come much lower than previously expected. NII is anticipated to slide 12% sequentially, which is substantially below the 4-5% fall guided during the first-quarter earnings conference call.

While providing the reason behind this dismal view, KeyCorp’s chief financial officer Clark Khayat said, “Clients deposits are staying in place, they are just more expensive, and they are going to continue to be expensive as long as rates sort of sit where they are.”

Morgan Stanley’s (MS Quick QuoteMS - Free Report) trading and investment banking (“IB”) outlook looks bleak for the near term.

Per Morgan Stanley’s co-president, Andy Saperstein, the firm expects a year-over-year decline in its trading and IB revenues in the second quarter of 2023.

Saperstein believes that because of a more challenging economic environment, Morgan Stanley’s sales and trading “results will be notably down year over year versus a strong second quarter last year,” while “investment banking is also very challenged.”

JPM has also warned that its IB business will be negatively impacted this year because of the economic slowdown and uncertain outlook.

At its Investor Day last month, JPM provided guidance for IB and markets revenues, which are expected to be down 15% in the first half of 2023.