JPMorgan raises revenue forecast amid First Republic takeover

Interactive Brokers Chief Strategist Steve Sosnick joins Yahoo Finance Live to discuss JPMorgan raising it's revenue target as a result of receiving more net interest income amid its acquisition of First Republic Bank.

Video transcript

JULIE HYMAN: Let's talk about another area that where there's a little more cash on hand, depending on who you're talking about. The bigger is better. I guess turning our attention to the banks is what I'm talking about. JPMorgan raising its target here this morning and saying it is getting more net interest income this year, $84 billion worth after it took over First Republic, $3 billion higher than guidance that it gave in April.

JP Morgan, of course, emerging as a beneficiary of the recent regional banking tumult. It's also having an investor day today. So this was part of the disclosures as part of that. At the same time, Daniel Pinto, who is the president there, did say things are good right now. But they do see a little bit of signs of economic deterioration. But like-- I don't know, I guess can you even bet against JPMorgan at this point?

STEVE SOSNICK: They have this huge systemic advantage now and it's--

JULIE HYMAN: I mean, they had it before.

STEVE SOSNICK: They did before.

JULIE HYMAN: And now, they got it even more.

STEVE SOSNICK: Because now, you know, even more people are incentivized to go with the too big to fail bank. And if there's one that's really too big to fail, it's JPMorgan. So I mean, if you're a JPMorgan customer, you're basically lending them money. You know, you're lending them money because they're paying you maybe one or two basis points. And you're happy for the privilege because you're pretty much OK with it because, you know, you think it's safe.

They're turning around and lending that via reverse repos to the Fed at over 5% now. That is a great business. So, of course, so if they took in all these deposits from First Republic, whatever hadn't managed to, you know, whichever ones hadn't managed to get out of the bank in that period of time. They can turn around.

And, you know, they're probably not paying very much on those deposits right now because, you know, people are thankful to be getting what they're getting. And JP Morgan can invest that money short-term very productively for almost no risk. It's what a fabulous business to be in. It's boring, but fabulous.

BRAD SMITH: Well, let's talk about the other side of what has been too big to fail in the what's been coined too small to succeed or too small to grow in PacWest, Steve.