JP Morgan Chase CEO Jamie Dimon sent fresh shockwaves through the industry when responding to a question regarding the intense competition within the financial sector. "I’m beginning to see parallels to the era before the 2008 financial crisis, when massive lending ended in disaster," he remarked. "Unfortunately, we saw something similar in 2005, 2006, and 2007 – almost the exact same thing. The upswing meant we were all making a lot of money," Dimon told investors. At the same time, he made it clear that JP Morgan is not willing to issue riskier loans just to boost net interest income. "I see some people doing stupid things. They are just doing stupid things to create net interest income (NII)," he said.
The appearance of the "cockroaches"
Dimon, who steered the largest US bank through the 2008 crisis and acquired two major collapsing rivals, noted that he expects the credit cycle to deteriorate again at some point, though he is unsure exactly when. The CEO has been warning for months about a potential downgrade in credit portfolio quality. When the car company Tricolor Holdings and parts supplier First Brands Group collapsed last year, he stated that seeing one "cockroach" usually means more are likely to appear.
The problems
In recent weeks, various sectors have faced "market terror" surrounding artificial intelligence (AI), as investors evaluate the impact of the new technology on the markets. "There is always a surprise in a credit cycle," Dimon said, adding that the surprise usually concerns the specific industry involved. "This time it might be the software sector because of AI." Although this may push JP Morgan toward greater scrutiny of specific loans, Dimon expressed doubts that it would significantly impact credit losses. The financial sector, like many others, has come under pressure in recent weeks due to AI concerns. Dimon stated that he sees his bank as a winner in the "AI battle." "At the end of the day, across 100 areas, we will be winners in 75 and losers in 25," he said.
Succession
During an extensive Q&A session at what the bank described as a "company update" for investors, Dimon was inevitably asked about his succession. He has led JP Morgan for 20 years, building it into the largest and most profitable bank in the US. The question of when he might retire, and who will succeed him, has remained a source of intense interest on Wall Street for years. This time, his answer was broadly consistent with recent statements. He will remain at the bank for "a few years" as CEO and "perhaps a few more" as Executive Chairman, adding that ultimately, this depends on the JP Morgan Board of Directors.
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