Jamie Dimon, CEO, JP Morgan Chase, throughout a Jim Cramer interview, Feb. 23, 2023.
CNBC
Deposit runs have led to the collapse of three U.S. banks this yr, however one other concern is constructing on the horizon.
Business actual property is the realm more than likely to trigger issues for lenders, JPMorgan Chase CEO Jamie Dimon advised analysts Monday.
“There's at all times an off-sides,” Dimon mentioned in a question-and-answer session throughout his financial institution's investor convention. “The off-sides on this case will most likely be actual property. It's going to make sure areas, sure workplace properties, sure development loans. It could possibly be very remoted; it will not be each financial institution.”
U.S. banks have skilled traditionally low mortgage defaults over the previous couple of years resulting from low rates of interest and the flood of stimulus cash unleashed in the course of the Covid-19 pandemic. However the Federal Reserve has hiked charges to combat inflation, which has modified the panorama. Business buildings in some markets, together with tech-centric San Francisco, might take successful as distant staff are reluctant to return to places of work.
“There shall be a credit score cycle. My view is it will likely be very regular” excluding actual property, Dimon mentioned.
For instance, if unemployment rises sharply, bank card losses may surge to six% or 7%, Dimon mentioned. However that can nonetheless be decrease than the ten% skilled in the course of the 2008 disaster, he added.
Individually, Dimon mentioned banks โ particularly the smaller ones most affected by the business's latest turmoil โ must plan for rates of interest to rise far greater than most anticipate.
“I believe everybody needs to be ready for charges going greater from right here,” as much as 6% or 7%, Dimon mentioned.
The Fed concluded final month mismanagement of interest-rate dangers contributed to the failure of Silicon Valley Financial institution earlier this yr.
The business is already constructing capital for potential losses and regulation by reining in its lending exercise, he mentioned.
“You are already seeing credit score tighten up as a result of the best manner for a financial institution to retain capital is to not make the subsequent mortgage,” he mentioned.