UPDATE: Investor Steve Eisman, known for predicting the 2008 financial crisis, is pushing back against fears of a repeat following recent bank earnings reports. Speaking on his podcast Real Eisman Playbook on Saturday, he stated that credit deterioration is “only marginal” and not enough to trigger a recession.
Recent earnings from major banks, including JPMorgan Chase & Co., Citigroup Inc., and Wells Fargo & Co., revealed mixed trends in commercial credit. Eisman noted, “Yes, there are signs of credit deterioration on the commercial side, but not enough to actually cause a recession.”
Despite a 33% year-over-year increase in nonaccrual loans at JPMorgan and a staggering 119% rise at Citigroup, Eisman emphasized that this environment is distinct from the lead-up to the 2008 crisis. “The great financial crisis was different,” he explained, citing that underwriting standards back then allowed unqualified borrowers to secure loans easily.
While big banks showed resilience, concerns are mounting among smaller regional banks. Zions Bancorporation NA reported a $50 million charge-off related to commercial and industrial loans, leading to a 12% drop in its stock. Similarly, Western Alliance Bancorp faced a decline after announcing a lawsuit against a borrower for fraud.
Adding to the unease, JPMorgan’s CEO Jamie Dimon warned of rising credit risks during last week’s earnings call. He ominously noted, “When you see one cockroach, there’s probably more,” referencing recent bankruptcies in the auto lending sector.
As these developments unfold, the financial community watches closely, especially regarding the health of regional banks. Eisman’s insights suggest that while caution is warranted, the current economic landscape does not mirror the catastrophic conditions of 2008.
Investors are urged to stay informed as these trends develop, particularly given the implications for the broader economy. As of now, JPMorgan shares are down 0.33% at $297.56, with a slight increase in overnight trading.
Stay tuned for updates as we monitor these critical developments in the banking sector.
