UPDATE: Investor Steve Eisman, renowned for predicting the 2008 financial crisis, has dismissed fears of a financial meltdown following recent bank earnings reports. In a podcast episode released Saturday, October 14, 2023, Eisman stated that the current credit deterioration is “only marginal” and not enough to signal an impending recession.
Recent earnings from major banks, including JPMorgan Chase & Co. and Citigroup Inc., 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 or indicate that a recession is about to occur.”
JPMorgan reported a concerning 33% increase in nonaccruals year-over-year, while Citigroup faced a staggering 119% rise. However, banks like Wells Fargo and Bank of America showed declines, suggesting a more complex landscape.
Eisman contrasted the current environment with the lead-up to the 2008 crisis, where “underwriting standards had deteriorated to such an extent that people who should never have been given loans were swimming in them.” He emphasized that today’s market is in a “normal cycle,” arguing that fears of a repeat crisis are unwarranted.
Despite Eisman’s reassurances, concerns are mounting among regional banks. Zions Bancorporation NA, based in Utah, disclosed a $50 million charge-off related to commercial and industrial loans, leading to significant losses of $60 million in the third quarter. Following this news, Zions’ stock plummeted 12%.
Similarly, Western Alliance Bancorp experienced a decline after revealing it had filed a lawsuit against a borrower for fraud. Adding to the unease, JPMorgan Chase CEO Jamie Dimon warned of rising credit risks during the company’s earnings call, stating, “When you see one cockroach, there’s probably more,” in reference to recent bankruptcies in the auto lending sector.
As of Friday, shares of JPMorgan Chase & Co. were down 0.33%, closing at $297.56, but showed signs of recovery with a 0.32% increase in after-hours trading. The stock maintains a strong position in Benzinga’s Edge Stock Rankings, reflecting positive momentum.
Investors and analysts are closely monitoring these developments as concerns about credit quality persist. The implications of these earnings reports will be crucial in shaping market sentiment in the coming weeks.
Stay tuned for further updates as the situation evolves.
