Jamie Dimon, CEO of JP Morgan, has indicated potential further losses in the private credit sector, particularly following the recent failures of sub-prime auto lender Tricolor and car parts supplier First Brands. On Tuesday, the bank reported a $170 million loss due to Tricolor’s collapse amid fraud allegations, despite having no links to First Brands, which operates in the U.S. auto parts market.
Both companies were funded through private credit in the largely unregulated shadow banking sector, which is not bound by the same disclosure requirements as traditional banks. This lack of regulation raises concerns regarding the interconnectedness of regulated banks, like JP Morgan, with private credit entities. They may have direct exposure through loans to private businesses or to the credit firms themselves.
Dimon expressed that additional failures in the sector are a possibility. During an analyst call, he remarked that the emergence of issues suggests there could be more problems, using the metaphor of a “cockroach.” He acknowledged the inherent risks associated with lending to the shadow banking sector, describing it as a broad category where weaknesses could be exposed during economic downturns.
Dimon noted that while many players in the private credit sector are knowledgeable, not all adhere to high standards. He suggested that the current benign credit environment might mask underlying risks, projecting that some weaknesses may become evident in a downturn. He emphasized the importance of vigilance in scrutinizing operations to identify potential risks, admitting that JP Morgan has also encountered its own mistakes. This situation underscores the complexities and potential vulnerabilities within the private credit landscape.
Source: https://www.theguardian.com/business/2025/oct/14/jp-morgan-jamie-dimon-losses-private-credit-sector