It may have been a prescient comment by the Chief Executive Officer of the world’s most valuable bank.
“I probably shouldn't say this, but when you see one cockroach, there’s probably more, you know. Everyone should be forewarned for one on this one,” JPMorgan Chase Chairman and CEO Jamie Dimon said.
He was responding to a question on Wednesday from an analyst who asked if the bank had reviewed its processes after writing off US$170 million of loans to bankrupt automotive parts dealer Tricolor.
A day later, shares in United States banks plunged as concerns grew about loans risks following the Tricolour collapse and another automotive sector bankruptcy, First Brands.
Shares in banks including Zions Bancorporation, Western Alliance, and Jefferies, fell sharply on Thursday as investors became nervous about risk in the sector, which has been shaken by exposure to the auto bankruptcies.
Zions dropped 12% after announcing a $50 million loss on two commercial and industrial loans in California, while Western Alliance dived after 11% disclosing a lawsuit alleging fraud by Cantor Group V, LLC.
Investment bank Jefferies plunged 9% after it revealed an exposure to First Brands, bringing losses since the auto parts business’ bankruptcy announcement on 28 September to more than 20%.
The regional banking index dropped 5.8%.
The bankruptcies have raised questions about the quality of loans, especially in the private credit market.
Alternative and other asset managers also suffered from the sell-off with Blue Owl Capital (NYSE: OWL) shedding more than 7% of value, Ares Management (NYSE: ARES) more than 6%, Blackstone (NYSE: BX) more than 3%, Apollo Global Management (NYSE: APO) more than 5%, and Carlyle Group (NASDAQ: CG) about 4%.
For Dimon’s part, he tried to reassure analysts about his bank’s position, saying: “We think we're okay in other stuff, but my antenna goes up when things like that happen.
“We always look at these things, and we're not omnipotent, we make mistakes too so we'll see, because there clearly was, in my opinion, fraud involved in a bunch of these things but that doesn't mean we can't improve our procedures."
