Banking stocks slump as Dimon warns over bad loans

(Sharecast News) - Banking stocks were under pressure on Tuesday amid concerns about the credit market after the boss of JP Morgan warned about the risk of bad loans. In comments at an annual investor update on Monday, Dimon said he was starting to see parallels with the time before the 2008 financial crisis, when a rush to make loans ended badly and that some rival banks were doing "dumb things" to boost net interest income.

Kathleen Brooks, research director at XTB, said: "A narrative around credit concerns and a potential 2008 scenario forming is also starting to gain traction. Jamie Dimon, the CEO of JP Morgan, sounded a warning about the risks of bad loans in the banking system.

"He said that rival banks are doing 'dumb things' to boost net interest income. He added that AI disruption could cause a souring in the credit cycle as multiple industries come under pressure from AI concerns.

"This did not save JP Morgan from a sharp selloff across the banking sector on Monday, and JPM's share price dipped more than 4% on Monday."

Brooks said it was worth noting that the default rate across European corporates was very low at 4.4% at the end of 2025, and is expected to fall this year.

"There were only $3.9bn of defaults in European high yield debt last year, and only $9bn in defaults in leveraged European loans," she said. "While this could change this year, it is hopeful that it comes off a low base. Trying to guess a credit collapse might make good headlines, but it may not become a reality, and the markets could be overreacting to what Dimon had to say."

At 1250 GMT, Standard Chartered, Lloyds, Barclays and NatWest were all trading lower. StanChart was also in focus after full-year results.