Auto bankruptcies reveal ‘early signs’ of lending excess

JPMorgan Chase Bankruptcies in the U.S. auto market are a sign that credit standards have grown too lax over the past decade or so, CEO Jamie Dimon said Tuesday.

Dimon, the longtime leader of the largest U.S. bank by assets, was referring to the recent collapse of auto parts firm First Brands and subprime auto lender Tricolor Holdings.

“Have we had a major credit bull market since 2010 or 2012? That’s like 14 years,” Dimon told CNBC during a call with reporters.

“These are early signs that there may be some excess there,” Dimon said. “If we have a crisis, you’re going to see a lot more credit problems.”

Dimon used more colorful language about the Tricolor failure in a call with analysts later Tuesday.

“When you see one cockroach, there are probably more,” Dimon told analyst Mike Mayo. “Everyone should be warned about this in advance.”

The pair of bankruptcies have raised concerns about hidden risks inherent in banks like JPMorgan. jefferies And Fifth Third Providing financing to private companies. Reporters’ and analysts’ questions about loan losses were at the forefront this quarter, where JPMorgan easily beat expectations thanks to increased activity in institutional trading.

CFO Jeremy Barnum said JPMorgan managed to avoid First Brands’ losses but lent money to Tricolor, causing a $170 million charge-off in the quarter. A charge-off occurs when a bank realizes that it will not receive repayments for the loans it made.

“This isn’t our finest moment,” Dimon said of the Tricolor episode. “When something like this happens, you can assume we’re looking at every aspect… You can never completely avoid these things, but the discipline is to look at it with a cold eye and go over every little thing.”

Automotive failures, which occurred amid pressure on international supply chains during President Donald Trump’s tariff hikes, have ensnared a number of banks.

This month investment bank Jefferies in question While it stated that the funds it manages owe $715 million from companies that purchased First Brand inventory, UBS said its funds have an exposure of approximately $500 million.

Last month, regional bank Fifth Third said it expected losses of up to $200 million due to alleged borrower fraudulent activity; the customer was Tricolor, Bloomberg reported.