Wall Street banks are seeing limited fallout from the bankruptcies of auto parts supplier First Brands and subprime auto lender Tricolor, despite some concerns of wider credit market stress.
In earnings calls on Tuesday, executives from top banks affirmed their risk management practices and continued strength in credit markets.
Goldman Sachs (NYSE:GS) CFO Denis Coleman said the bank has consistent underwriting standards and robust upfront due diligence. “The only thing to add is we don’t have any direct exposure to either of the big names that have been in the press lately.”
Wells Fargo (NYSE:WFC) CFO Michael Santomassimo said when it comes to lending to non-bank financials, “we very much focus on the big established players, which obviously reduces potential issues.”
Citigroup (NYSE:C) CFO Mark Mason affirmed that the lender didn’t have any direct or indirect exposure to the recent bankruptcies.
BlackRock (NYSE:BLK) CFO Martin Small said exposures from recent private credit bankruptcies are in syndicated bank loan and CLO markets, not with large private credit managers and direct lending books.
“The reported cases look more like idiosyncratic pockets of stress and things like deep subprime or again, where there’s been potential fraud reported, they don’t look like broad stresses on asset-based finance or consumer credit,” Small noted.
But JPMorgan (NYSE:JPM) CEO Jamie Dimon struck a more cautious tone, after the bank wrote off $170M in Q3 related to Tricolor. JPM had no exposure to First Brands.
“Whenever something happens, we scour all procedures, all underwriting, everything… when you see one cockroach, there are probably more,” Dimon said. “We’ve had a benign credit environment for so long that I think you may see credit in other places deteriorate a little bit more than people think when, in fact, there’s a downturn.”