Jamie Dimon, the chief executive of JP Morgan Chase, has warned that some lenders are doing “dumb things” and he is starting to see parallels to the era before the 2008 financial crisis.
Dimon, 69, who steered America’s biggest bank through the global financial crisis, told investors: “Unfortunately, we did see this in ’05, ’06 and ’07, almost the same thing — the rising tide was lifting all boats, everyone was making a lot of money, people were leveraging to the hilt.
“My own view is people getting a little comfortable that this is real, these high asset prices and high volumes, and we won’t have any kind of problem, whatsoever.”
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Referring to unspecified competitors, he added: “I see a couple people doing some dumb things. They’re just doing dumb things to create [net interest income], or say they’re winning in the mortgage business.”
He also said he expects the credit cycle will eventually deteriorate again, potentially as a result of AI related disruption to software companies.
“There’s always a surprise in a credit cycle … And this time around, it might be software, because of AI … There’s moving tectonic plates underneath it, it causes the industry to be challenged.”
Dimon warned in October about weakness in the credit market after the collapses of auto lender Tricolor Holdings and car-parts supplier First Brands Group. He told investors at the time: “When you see one cockroach, there are probably more, and so everyone should be forewarned of this one.”
Dimon’s latest warning came as a Bank of America client survey found that, for the first time, an “AI bubble” is the biggest concern of credit investors, who noted the high levels of borrowing of cloud service providers, known as “hyperscalers”, including Microsoft, Amazon, Meta Platforms and Google.
Investors expect hyperscaler debt issuance of $285 billion this year, up from the $210 billion expected in December’s survey. Some 23 per cent of respondents saw the threat of an AI bubble as their top concern, up from 9 per cent in Bank of America’s previous survey in December.
Fears of a potentially unsustainable surge in investment and valuations of AI companies overtook “bubbles in credit” as the top concern, according to the survey.
Meanwhile, “few worry about geopolitics or a central bank policy error”, the bank’s analysts wrote.
However, investors were less worried about the ultimate tech disruption ahead, with only 10 per cent saying that AI-driven corporate obsolescence is their big worry.
