Three charts show where Jamie Dimon’s credit ‘cockroaches’ could be hiding in the market

• There are signs that Jamie Dimon might be right about the cockroaches lurking in the debt market, says Rosenberg Research.

• The research firm noted signs of growing credit difficulties for households and businesses.

• Consumers and businesses are under pressure and are falling behind on payments.

Jamie Dimon may be right about cockroaches.

The head of JPMorgan recently warned markets that problems could be brewing in the credit market. Your reasoning? There is always more than one cockroach if you see one, he said.

Dimon was commenting on the recent high-profile bankruptcies of auto parts company First Brands and subprime auto lender Tricolor Holdings. But there are signs that the infestation Dimon hinted at is already more widespread, according to Rosenberg Research.

“Jamie Dimon seems increasingly correct: there is always more than one ‘cockroach’ as ​​signs of credit stress increase in households and the corporate sector,” the firm said this week, pointing to the main signs of credit stress it was monitoring.

These are the warning signs that credit roaches could be lurking:

More loans are moving into delinquency status.

The balance of loans that are recently delinquent, or whose borrowers are at least 30 days behind on payments, rose to 5.3% in the third quarter. This is the highest rate of new defaults since 2014, according to data from the New York Federal Reserve.

Here is the breakdown by loan type for the third quarter:

More consumers are also falling into what is known as “severe” delinquency, in which loan payments are late by 90 days or more.

The percentage of loans that became seriously delinquent rose to 3% last quarter, also the highest rate in more than a decade.

Here’s the breakdown by loan type from last quarter:

“Simply put, the consumer is stressed. More and more households are having to divert funds toward paying down debt and away from discretionary spending as borrowing costs remain elevated,” the firm wrote.

Corporations are also under more pressure. The percentage of corporate loans considered distressed spiked in 2022 and has remained elevated since then, Rosenberg said, citing data from Bloomberg Intelligence.

The delinquency rate for commercial loans has increased steadily over the past few years. The percentage of commercial loans in default rose to 1.2% at commercial banks in the second quarter, 28 basis points higher than in the second quarter of 2023, according to Fed data.

The stock of distressed loans rose another $70 billion in October alone, Bloomberg data shows.

“The chickens may now be coming home. For many of the same reasons, households are feeling the stress, businesses have had to deal with elevated borrowing costs, slower demand (outside of AI), and elevated levels of uncertainty overall,” the research firm wrote, noting the rise of private lending in recent years.

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