Jamie Dimon, CEO, JP Morgan Chase, throughout a Jim Cramer interview,Feb 23, 2023.
CNBC
Deposit runs have actually resulted in the collapse of 3 U.S. banks this year, however another issue is developing on the horizon.
Commercial property is the location more than likely to trigger issues for lending institutions, JPMorgan Chase CEO Jamie Dimon informed experts Monday.
“There’s always an off-sides,” Dimon stated in a question-and-answer session throughout his bank’s financier conference. “The off-sides in this case will probably be real estate. It’ll be certain locations, certain office properties, certain construction loans. It could be very isolated; it won’t be every bank.”
U.S. banks have actually experienced traditionally low loan defaults over the last couple of years due to low rates of interest and the flood of stimulus cash released throughout the Covid-19 pandemic. But the Federal Reserve has actually treked rates to eliminate inflation, which has actually altered the landscape. Commercial structures in some markets, consisting of tech-centric San Francisco, might take a hit as remote employees hesitate to go back to workplaces.
“There will be a credit cycle. My view is it will be very normal” with the exception of property, Dimon stated.
For example, if joblessness increases dramatically, charge card losses may rise to 6% or 7%, Dimon stated. But that will still be lower than the 10% experienced throughout the 2008 crisis, he included.
Separately, Dimon stated banks– particularly the smaller sized ones most impacted by the market’s current chaos– require to prepare for rates of interest to increase far greater than a lot of anticipate.
“I think everyone should be prepared for rates going higher from here,” as much as 6% or 7%, Dimon stated.
The Fed concluded last month mismanagement of interest-rate threats added to the failure of Silicon Valley Bank previously this year.
The market is currently developing capital for possible losses and guideline by checking its financing activity, he stated.
“You’re already seeing credit tighten up because the easiest way for a bank to retain capital is not to make the next loan,” he stated.
