US regional bank stocks hit by Zions charge-off, fraud allegations

Core Viewpoint - U.S. regional bank stocks experienced a decline following Zions Bancorporation's announcement of a $50 million loss in Q3 due to two problematic commercial and industrial loans, raising concerns about hidden credit stress amid high interest rates and economic uncertainty [1] Group 1: Zions Bancorporation - Zions Bancorporation disclosed a $50 million loss in Q3 related to two commercial and industrial loans from its California division, contributing to investor unease [1] - Analysts from Raymond James questioned Zions' underwriting standards and risk management policies due to the large balance loan to a fraudulent borrower [2] - Zions' shares fell by 8.6% in afternoon trading, and the bank plans to recognize the charges in Q3 while pursuing legal action to recover the loans [4] Group 2: Industry Concerns - Recent bankruptcies, including auto parts maker First Brands and subprime lender Tricolor, have heightened scrutiny on banks' risk controls and the opaque credit market [3] - Analysts noted that while some view the bankruptcies as isolated incidents, they still contribute to overall market unease regarding asset quality trends [4] - The regional banking sector faces potential re-rating risks if further disclosures reveal additional losses or exposures [6] Group 3: Other Regional Banks - Western Alliance's stock saw a reduction in losses after announcing a lawsuit alleging fraud by Cantor Group V, LLC, and the bank is providing more information about its credit relationships [5] - Western Alliance's total criticized assets were reported to be lower than on June 30, with shares down 7.8% [6]