Episode summary
Bank Earnings Offer Little Cause for Alarm on Private Credit | Bloomberg Businessweek
Bloomberg Businessweek Daily
· · 40 min · Hosts: Carol Massar, Tim Stenovec · Guests: Herman Chan, Joe Hegener, Alli McCartney, Adam Farrar, Sid Philip
Summary
Big-bank earnings did not show the kind of broad credit stress that would justify panic about private credit. The host and a Bloomberg Intelligence analyst said aggregate credit loss provisions from the banks reporting so far have been modest, with JPMorgan’s lower-than-expected provisions offsetting Citi’s higher build tied to consumer card losses and macro uncertainty. Wells Fargo’s results also did not point to a major deterioration, even as some lenders saw higher reserves.
Jamie Dimon warned that a credit cycle will eventually arrive and that losses could be worse than expected, but he said it would not be systemic. On private credit specifically, a guest from Astor Zoa Capital argued that years of inflows have encouraged risk-taking and that the asset class is opaque, so write-downs may still emerge. Still, he agreed the current bank data do not show a near-term crisis.
The discussion also looked at why investors remain constructive on large banks: a steeper yield curve, possible rate cuts, and the longer-run gains from automation and AI. Citi’s strong quarter and progress on its transformation were presented as further evidence that the market is reacting more to noise than to a worsening credit backdrop.
Key takeaways
- The analyst said the four big banks reporting so far showed no big red flags in aggregate credit loss provisions, with JPMorgan offsetting some of Citi’s weakness.
- Jamie Dimon said a credit cycle will come, but he does not think private-credit losses would be systemic.
- The guest from Astor Zoa Capital said years of inflows into private credit have encouraged risk-taking and hidden losses may still surface.
- The analyst said JPMorgan’s lower net interest income guide should not worry investors because fee income offsets part of the decline.
- The guest argued that a steeper yield curve and AI-driven automation are a secular tailwind for large banks and insurers.
Notable quotes
“There will be a credit cycle one day, and I think when there's a credit cycle, losses it will be worse than people expect”
“I don't think it's systemic. It almost can't be systemic at that size relative to anything else”
“The problem with private credit though, right, is that it is intrinsic it's sort of a black box”
“No big red flags in aggregate credit loss provisions from the four banks that have reported so far, including Wells Fargo”
How the episode opens
Bloomberg Audio Studios. Podcasts, radio, news. This is Bloomberg Businessweek Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy.
Plus global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast with Carol Massar and Tim Stenovec on Bloomberg Radio. Charlie's been talking about a lot.
We all are because, man, earnings officially off and running. Three more of the big banks reported, as you know, including the dominant US bank, JP Morgan Chase. Shares though of JP Morgan, they are trading lower today even as traders there posted their highest-ever quarterly revenue in the first three months of the year.
So too are lower shares of Wells Fargo as it missed lending estimates. And then there's City. Yeah, bucked the trend.
Citigroup logged its best returns in 5 years, driven by a wave of market volatility. Weighing in though on today's credit cycle, a key voice in Wall Street, somebody that we know all of you listen to, including us, JP Morgan Chase's longtime CEO Jamie Dimon. Jamie Dimon, he talked earlier on the call with analysts.
There will be a credit cycle one day, and I think when there's a credit cycle, losses it will be worse than people expect relative to the scenario. I don't think it's systemic. It almost can't be systemic at that size relative to anything else.
Well, Jamie Dimon said it. I mean, listen, he's watching this, we know. He's talked about cockroaches when it comes to private credit and concerns.
That of course was Jamie Dimon of JP Morgan Chase earlier with analysts on their earnings call. Hey, let's get more though on the bank results. We've got a great key voice here, right here at Bloomberg.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- private credit woes
- bank earnings
- credit loss provisions
- us consumer card losses
- airline merger talks
Companies and tickers mentioned
- WFC
- GS
- C
- JPM
- UBS
- UAL
- AAL
- Wells Fargo
- Goldman Sachs
- Citigroup
- JPMorgan Chase
- UBS
- United Airlines Holdings
- American Airlines Group
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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