JPMorgan Chase (JPM) CEO Jamie Dimon offered a mea culpa and a warning Tuesday when discussing the losses his bank experienced from the downfall of subprime auto lender Tricolor Holdings, saying, “It is not our finest moment” and “when you see one cockroach, there’s probably more.”
Dimon and his CFO discussed the Tricolor impact on calls with reporters and analysts while disclosing a $170 million charge-off — a measure of unpaid debt written off as a loss — related to its wholesale lending to the subprime lender.
“When something like that happens, you could assume that we scour every issue, every universe, everything,” Dimon told reporters, while admitting that it was “not our finest moment.”
“You can never completely avoid these things, but the discipline is to look at it in cold light and go through every single little thing, which you can imagine, we’ve already done, and maybe there might be more to do,” Dimon added.
“My antenna goes up when things like that happen,” Dimon added when speaking with analysts later on Tuesday morning.
“I shouldn’t say this, but when you see one cockroach, there’s probably more,” Dimon added.
Tricolor filed for bankruptcy in early September. The collapse of the Dallas-based subprime auto lender has been linked to allegations of auto loan fraud, affecting multiple banks.
JPMorgan Chase CFO Jeremy Barnum revealed the $170 million charge-off on the calls with reporters and analysts.
“We’re not in the habit of calling out exposures to individual borrowers, especially for amounts immaterial, but given the amount of attention … we might as well not dance around it,” Barnum said.
Along with JPMorgan, Fifth Third Bank (FITB) and Barclays PLC (BCS) have also appeared as creditors in Tricolor’s bankruptcy, according to court filings.
Fifth Third disclosed its exposure to Tricolor in September, saying it expects to take a $170 million to $200 million loss on a so-called asset-backed loan to Tricolor.
The Tricolor loss did little to drag down results at JPMorgan, which, like other big banks, rode a surge in dealmaking over the second half of the summer. The country’s largest bank reported a 12% jump in third quarter profits, about $1 billion more than analysts anticipated.
But the fall of Tricolor and a larger bankruptcy of auto parts supplier First Brands have captured attention on Wall Street, and investors are looking for signs that credit among commercial customers is weakening.
JPMorgan’s net charge-offs did rise 8% from the second quarter to $2.6 billion, driven by higher write-downs within its massive commercial and investment banking division.
