JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon warned of potential problems in the private credit sector, cautioning that "this could have serious consequences," especially as retail investors gain more exposure to the booming asset class.
“Do you want to expose retail investors to these illiquid products? The answer is probably yes, but don’t act as if there’s no risk in doing so,” Dimon said at an industry conference on Wednesday. “Retail investors tend to act very quickly and complain to their senators and congressmen.”
JPMorgan and other banks have been competing in the $1.7 trillion private-credit industry, with giants like Apollo Global Management Inc. taking on bigger and bigger deals. But JPMorgan is also seeking to expand: The Dimon-led firm has reserved more than $100 billion of its own balance sheet funding for its direct lending business and is forming a syndicated lending partnership. Its asset manager is also looking to acquire a private-credit firm, Bloomberg News reported last week.
Dimon said Wednesday that his firm wants to be product neutral when lending to clients and that his firm also serves many major private lenders. He said some people in the industry are "brilliant," but not all are, and that market problems are often caused by those that are "not good enough."
The longtime CEO wrote in his annual letter to shareholders that the private credit industry has not yet been tested by adverse market conditions, which often expose weaknesses in "new products."
“I’ve looked at a few deals that were rated by the ratings agencies, and I was shocked by the ratings they received,” Dimon said. “It reminds me a little bit of the mortgage market before the subprime crisis.”
Dimon has been warning about the risks to the U.S. economy recently, and he continued today that the chances of stagflation in the U.S. economy are higher than most people think. Last week, he said he would not rule out the possibility of a hard landing for the U.S. economy.
The question of Dimon's successor has also attracted market attention recently. Dimon said that the differences between the bank's chairman and CEO have been exaggerated, but added that he and the board will make the right choice on the succession issue. He said: "It may be between 4.5 years and 2.5 years. (The successor) will be decided by the board."
Article forwarded from: Jinshi Data