Jamie Dimon discourages use of term credit crunch during earnings call with analysts

By Steve Gelsi

JPMorgan Chase CEO says that 'conditions will be a little bit tighter' for bank credit but that 'it's not like a credit crunch'

While it will be more expensive for banks to deploy capital this year, talk of a possible credit crunch tied to higher interest rates remains overblown, JPMorgan Chase & Co. CEO Jamie Dimon said Friday.

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Although Dimon acknowledged that more challenging lending conditions are already being seen in the real-estate sector, he said bank credit overall will continue to flow despite concerns about a credit crunch voiced by Chicago Fed President Austan Goolsbee on Friday.

"Obviously, there's going to be a little bit of tightening, and most of that will be around certain real-estate things," Dimon said, according to a transcript of JPMorgan's first-quarter earnings call with analysts. "You've heard it from real-estate investors already, so I just look at that as a kind of thumb on the scale. It just [means] the fast conditions will be a little bit tighter, [which] increases the odds of a recession. That's what that is. It's not like a credit crunch."

In real estate, banks have been hit both by a drop in mortgage demand due to higher interest rates as well as a looming wall of debt from office properties affected by slack demand for space. For its part, JPMorgan said Friday that its office-sector exposure is less than 10% of its portfolio and is focused in dense urban markets.

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On the call, analyst John McDonald of Autonomous Research posed a question about credit conditions: "There's a narrative out there that the industry could see a credit crunch. Banks are going to stop lending, and even [Federal Reserve Chair] Jay Powell mentioned that as a risk."

Dimon responded: "Yeah, I wouldn't use the word 'credit crunch' if I were you."

Dimon was also asked about the regulatory landscape for banks after the collapse of Silicon Valley Bank (SIVBQ) and Signature Bank (SBNY) in March.

"Look, we're hoping that everyone just takes a deep breath and looks at what happened and the breadth and depth of regulations already in place," Dimon said. "Obviously, when something happens like this, you should adjust, think about it."

Down the road, Dimon said, he could see potential limitations on held-to-maturity assets and perhaps more total loss-absorbing capacity for certain banks, as well as more scrutiny around interest-rate exposure.

"It doesn't have to be a revamp of the whole system -- just recalibrating things the right way," Dimon said. "The outcome you should want is very strong community and regional banks. And certain [drastic] actions ... could actually make them weaker. So that's all it is."

JPMorgan is also expecting to absorb higher capital requirements under the so-called Basel IV international banking measures, as well as an assessment to banks of the costs of the collapses of Silicon Valley Bank and Signature Bank by the Federal Deposit Insurance Corp., he said.

Also read: JPMorgan Chase CEO Jamie Dimon says looser rules did not cause recent bank failures

-Steve Gelsi

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04-17-23 0744ET

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