Jamie Dimon’s private credit comments not “a doomsday call”
Analysts at JP Morgan Private Bank have said Jamie Dimon’s recent comments about private credit “shouldn’t be misconstrued” as a negative stance, but instead are “a push for responsible practices amid the risks”.
Dimon, who is chief executive of the private bank’s parent company, JP Morgan Chase, recently hit the headlines when he highlighted risks he saw in the private credit market, including “opaque ratings, aggressive leverage, looser covenants and illiquid vehicles with five to 10-year lockups over the past few months”.
He also drew parallels with the subprime mortgage crisis of 2008, and cautioned that mounting losses in the growing private credit market, “which is now as large as the markets for leveraged loans or high yield bonds”, could “amplify” systemic stress.
However, Sitara Sundar, head of alternative investment strategy and market intelligence, and global investment strategists Federico Cuevas and Audrey Weiss, of JP Morgan Private Bank, said Dimon’s concerns that private credit could become a “recipe for a financial crisis”, if mismanaged, should not be interpreted as “a doomsday call”.
In a note, ‘Private credit: Promising or problematic?’, the private bank’s analysts explained that Dimon is “advocating for responsible practices and sees potential”, as demonstrated by JP Morgan’s own $50bn commitment to the space earlier this year.
“Jamie acknowledges that ‘parts of direct lending are good,’ and that the asset class can positively fill lending gaps left by banks under Basel III and higher rates, provided there’s greater transparency, disciplined underwriting and prudent regulation,” Sundar, Cuevas and Weiss wrote.
“After all, the risk lies with bad actors, not the asset class itself. Private credit isn’t inherently dangerous; it’s the execution that matters. With thoughtful structuring, it can deliver strong risk-adjusted returns without systemic issues.”
Read more: Global private credit fundraising jumps 60pc in Q1 2025
On the basis that while the industry’s growth is significant, “it’s still a smaller slice of corporate borrowing and not large enough to pose systemic risk”, the bank’s analysts said that fears of private credit leading to a systemic crisis are “overrated”.
Private credit assets under management is approximately $1.2tn (£890.3bn), equivalent to nine per cent of all corporate borrowing which, “while meaningful, we don’t believe it’s large enough to threaten the broader economy”, they wrote.
The analysts also countered that there would need to be a major economic downturn to see negative total returns in this space.
“In all, there are risks, and the industry won’t be immune to a potential economic slowdown,” said Sundar, Cuevas and Weiss.
“While we believe high-quality managers within senior direct lending will be able to navigate the impact of an economic downturn, we recommend diversification across the various segments of private credit outside of just senior direct lending (think asset-backed credit, opportunistic credit and secondaries).”
Read more: US senator writes to ratings agencies after reports of ‘inflating’ private credit ratings
