When asked about the intense competition in the financial industry, JPMorgan Chase CEO Jamie Dimon said he was beginning to see similarities to the era before the 2008 financial crisis, when a lending boom ended in a disastrous outcome.
“Unfortunately, we saw similar situations in 2005, 2006 and 2007 – when the tide rose, everyone made a fortune,” Dimon told investors on Monday. He said that although JPMorgan Chase was reluctant to issue riskier loans to boost net interest income, “but I saw some people doing some stupid things. They were just doing some stupid things to create net interest income.”
Damon, who led the largest bank in the US through the 2008 financial crisis and acquired two major rivals, said he expected the credit cycle to deteriorate again eventually, but he was unsure of the exact timing. The CEO has been warning for months that credit quality could deteriorate. Last year, when auto lender Tricolor Holdings and auto parts supplier First Brands Group went bankrupt, he said that seeing one “cockroach” meant there were likely to be more.
In recent weeks, all industries have been confronted with “panic trading” brought about by artificial intelligence, as investors weigh how this new technology might disrupt the market.
Damon said, “There are always some unexpected situations in the credit cycle.” He added that such unexpected situations often involve which industry will be affected. “This time, due to the rise of artificial intelligence, the software industry may become the focus.”
Although this might prompt JPMorgan Chase to review certain loans, Dimon expressed doubt that it would have a significant impact on credit losses.
In the early stages of the private credit cycle, Dimon’s lending institution largely remained on the sidelines. His own remarks threatened the fragile balance between the fast-growing private credit firms and banks. Although these companies had snatched some business from banks’ leveraged loan departments, they had also become one of the banks’ largest clients and sometimes even partners. His joke about cockroaches sparked a debate about which was more capable of weathering a broader economic downturn, banks or private credit firms.
Meanwhile, JPMorgan Chase has also been demonstrating its strength by offering a wide range of financing solutions, winning business from private credit management companies and Wall Street rivals and securing coveted debt deals, including a $20 billion check to support the acquisition of Electronic Arts, the largest commitment by a bank to a leveraged buyout to date.
Like many other industries, the financial sector has also seen its share prices fall in recent weeks due to concerns over artificial intelligence. On Monday, Dimon said he believes his bank will come out on top in the AI race.
“Ultimately, in 100 fields, we will have 75 fields as winners and 25 fields as losers,” Dimon said.
At JPMorgan Chase’s “Company Update” meeting for investors, Dimon was inevitably asked about succession during the extensive Q&A session. He has led JPMorgan Chase for 20 years and turned it into the largest and most profitable bank in the United States. For years, when he will retire and who will succeed him have been the focus of Wall Street’s attention.
This time, his response was largely in line with his recent remarks: He will serve as CEO of the bank for “several years” and then “possibly for several more years” as executive chairman, he said, adding that the final decision lies with JPMorgan Chase’s board.
