😶‍🌫️Banks’ all-time performance in the third quarter… But something’s weird?Banks’ all-time performance in the third quarter… But something’s weird?

🏦 Banks’ all-time performance in the third quarter… But something’s weird?

Why did JPMorgan build up provisions for bad debt and Goldman foreshadowed a massive year-end job cut.

📈 It was a perfect third quarter

JPMorgan: Net profit of $14.4 billion (12%↑), investment banking fees jump 16%
Wells Fargo: “Consumer Credit Sound” Optimism Drastically Shrink Bad Debt Provisions
Goldman Sachs: 42% Revenue Growth Beats Market Expectations

🐛 Jamie Dimon, “If you see a cockroach…”

This is a warning from JPMorgan CEO Jamie Dimon in his earnings call.

“If you see a cockroach, you have to see that there’s a lot more out of sight.”

The “wheelworm” he was referring to was the bankruptcy of subprime car lender Tricolor Holdings. JPMorgan lost $170 million in the incident and set aside an additional $810 million in bad debt provision in the third quarter alone.

⚠️ What is the problem?

✔️ Car loan subprime delinquency rises to 20-year high.
✔️ Credit insolvency that JPMorgan, known for its conservative risk management, also missed.
✔️ The path of risk transfer from fintech lending platform to lending platform and from banks to institutions is too complicated… Similar to 2008 subprime?

🎯 Conclusion: Consumer Credit Cracks

The bank’s performance shows a solid consumer lending trend and a recovery in strong business activity. But a sharp surge in delinquency rates in the subprime bracket and corporate bankruptcies suggest the credit cycle is turning around.

Dimon’s “If you see a cockroach, there are more cockroaches behind it” means that we don’t know how many more riskier credit risks there are in the market now that credit risks we haven’t seen have exploded.