Steve Eisman Dismisses 2008 Crisis Fears Amid Bank Earnings

UPDATE: Investor Steve Eisman has just dismissed growing concerns about a potential repeat of the 2008 financial crisis following recent bank earnings reports. Speaking on the Eisman Playbook podcast on October 14, 2023, he emphasized that the current credit deterioration is “only marginal” and does not warrant alarm.

Eisman’s comments come in the wake of earnings reports from major banks like JPMorgan Chase & Co. and Citigroup Inc., which revealed mixed trends in commercial credit. “Yes, there are signs of credit deterioration on the commercial side,” Eisman stated, adding, “but not enough to actually cause a recession.”

Despite some troubling figures, including a 33% year-over-year increase in nonaccruals at JPMorgan and an alarming 119% rise at Citigroup, Eisman remains confident. He noted, “There was some deterioration on the edges, but not enough to raise real alarm bells.” This contrasts sharply with the underwriting standards leading up to the 2008 crisis, which he described as severely compromised.

While big banks like JPMorgan and Wells Fargo & Co. reported solid quarterly performances, concerns are growing regarding smaller regional banks. Zions Bancorporation announced a significant $50 million charge-off related to commercial loans, causing its stock to plunge 12% after the news. This was compounded by Western Alliance Bancorp also facing turmoil after filing a lawsuit for fraud against a borrower.

Adding to the anxiety, JPMorgan CEO Jamie Dimon warned during the earnings call that “when you see one cockroach, there’s probably more,” referring to recent bankruptcies in the subprime auto lending sector. Shares of JPMorgan dipped 0.33% on Friday, closing at $297.56, while showing slight recovery in overnight trading.

Analysts and investors are closely monitoring these developments as they could significantly impact market stability. The current sentiment reflects a cautious optimism, with Eisman asserting, “Right now, I think we are in a normal cycle.”

As the situation develops, all eyes will be on how these credit concerns affect regional banks and the broader financial landscape. Investors are encouraged to stay alert for further updates as this story unfolds.