JPMorgan Chase CEO Jamie Dimon has reignited concerns about private credit risks, warning that losses on leveraged loans will exceed expectations when the next credit cycle hits. In his annual shareholder letter, Dimon highlighted weakening lending standards across the industry, citing aggressive borrower performance assumptions, weaker covenants, and increased use of payment-in-kind structures.

Dimon's comments come as private credit has expanded rapidly, with firms like Apollo, Ares, and Blackstone capturing market share once dominated by banks. JPMorgan itself sold its private credit business in 2016 due to post-financial crisis regulations, missing out on the sector's explosive growth. The bank has since sought to re-enter the space, committing $50 billion of its own capital alongside $15 billion from investors for direct lending to private equity-backed companies.

Despite JPMorgan's warnings, the bank remains deeply exposed to private credit through its lending to the industry. It has exercised its right to revalue loans amid AI-driven concerns about software company viability, marking down some private credit assets. Dimon's cautionary stance reflects his experience with multiple banking panics, noting that the industry hasn't faced a credit recession in years and some assume it will never happen again.