MW Jamie Dimon warns, 'When you see one cockroach, there are probably more,' after Tricolor loan loss

By Steve Gelsi and Philip van Doorn

JPMorgan CEO steps up internal efforts to spot bad loans, at the same time he calls for government deregulation to move faster

JPMorgan CEO Jamie Dimon said losses stemming from a bankrupt auto lender Tricolor may be immaterial to the bank, it could be a warning of other loan losses are coming.

JPMorgan Chase & Co. Chief Executive Jamie Dimon warned Tuesday that when it comes to bad loans, if there's one, more are likely to emerge, especially if the economy weakens.

The banking giant $(JPM)$ disclosed on Tuesday that its loans to privately held subprime auto lender Tricolor, which declared bankruptcy in September, contributed $170 million to losses booked during the third quarter on short-term loans to non-bank financial clients, such as auto-financing firms.

The loss took some of the sheen off the bank's better-than-expected third-quarter earnings. The stock initially rallied as much as 1.3% in the premarket, in the first minutes after the results were released, but closed with a 1.9% decline.

Dimon warned that there could be more credit problems unfolding for banks.

"When you see one cockroach, there are probably more," Dimon said during the analyst call. "[E]veryone should be forewarned on this one."

And while he assured that the Tricolor loss was immaterial to the bank, he expressed some embarrassment by saying it "was not our finest moment," and said the bank would step up efforts to make sure it doesn't happen again.

Although there was fraud involved in the case of Tricolor, that wouldn't change the bank's response.

"You should assume when anything happens, we scour all processes, all procedures, all underwriting, everything," Dimon said regarding the Tricolor loss. "My antenna goes up," when things like that happen, he said.

With regards to another recent bankruptcy - that of privately held auto-parts seller First Brands, which sent shares of fellow bank Jefferies Financial Group Inc. $(JEF)$ into a tailspin - JPMorgan eased some fears by saying it had no exposure.

Given the growth in the private-credit market, there has been some concern over a lack of visibility and disclosures. When asked by MarketWatch if there was a lack of transparency in private credit, Dimon said that although the bank has good visibility into its own transactions, these types of institutional deals mean that "you need to do your homework" as a lender.

He did say that transparency could become a bigger problem down the road, as more retail investors gain exposure to private credit through their insurance policies and newer retirement products.

Also read: Private-credit ETFs are here. Why your retirement account may be their next target.

When discussing banking regulations, Dimon said he'd like to see federal officials roll out new capital requirements under the Basel III banking and other measures as quickly as possible to help ease restrictions on how banks manage their capital.

Fifth Third brings Tricolor's problems to light

The problems with Tricolor became more visible last month, when Fifth Third Bancorp $(FITB)$ disclosed up to a $200 million loan loss tied to suspected fraud by a wholesale borrower. The bank will report its third-quarter results on Thursday.

While Fifth Third didn't disclose the name of the borrower involved at the time, reports had surfaced that it was Tricolor, which had announced $217 million asset-backed securities (ABS) transaction with Fifth Third, JPMorgan Chase and Barclays in June.

Fifth Third Chief Executive Timothy Spence said last month that the loss on its warehouse loan was an isolated incident and its collateral had been checked out by an unnamed third-party service provider.

The bank has launched a process to "take a step back and to look at our processes and to say, 'Is there something we could have done differently that would have allowed us either to catch this or to catch it earlier?'" Spence said.

Janney banking analyst Christopher Mariner told MarketWatch that third-party outsourcing to check loan collateral is normal in the industry but lenders must still manage their vendors.

"It is a critical theme inside of the bank regulatory framework," Mariner said. "[Collateral] is your responsibility even with a third party present."

Both Dimon and JPMorgan Chief Financial Officer Jeremy Barnum said they were keeping a close watch on employment figures to see if the economy softens.

Increasing unemployment would spark more loan defaults after more than a decade of favorable credit conditions, they said.

"The current facts on the consumer side is that the consumer is resilient, spending is strong and delinquency rates are actually coming in below expectations," Barnum said. "Certainly as you look ahead, there are there are risks."

"It's pretty easy to imagine a world where the labor market deteriorates from here," Barnum said. "And if that happens, obviously, as you well know, we're going to see worse consumer credit performance."

Also read: 'We will have a crash': Why Andrew Ross Sorkin thinks this market bubble will eventually pop

-Steve Gelsi -Philip van Doorn

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October 14, 2025 16:56 ET (20:56 GMT)

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