Zions Bancorporation(US:ZION) Hua Er Jie Jian Wen·2025-10-17 09:16Core Viewpoint - The significant drop in U.S. regional bank stocks is attributed to Zions Bancorporation's disclosure of a $60 million provision for two loans and a $50 million write-off, raising concerns about potential fraud cases in the banking sector [1][2]. Group 1: Market Reaction - U.S. regional banks collectively fell by 7%, with Zions' stock plummeting by 13% and Jefferies down by 10.6%, indicating widespread investor panic [1]. - High trading volumes and inquiries at Goldman Sachs reflect heightened investor anxiety regarding the implications of these loan defaults [1][4]. Group 2: Loan Defaults and Legal Actions - Zions Bancorporation's California Bank & Trust reported defaults on commercial loans, leading to a $50 million write-off, which is 5% of its expected 2025 earnings [2]. - Legal actions are underway, with Zions suing for full recovery from guarantors, and Western Alliance Bank also involved in litigation for $100 million against the same borrower [2]. Group 3: Investor Concerns - Investors are focused on three main questions: the approval process for these loans, the emergence of multiple unrelated fraud cases within a short timeframe, and whether smaller banks are relaxing underwriting standards to boost loan growth [5][6]. - The market is particularly concerned about the quality of Non-Depository Financial Institution (NDFI) loans, which constitute about 15% of regional banks' total loans [6]. Group 4: NDFI Loans and Market Sentiment - NDFI loans are under scrutiny, with significant differences in underwriting quality between large and regional banks, leading to varying stock performances [6][7]. - The sentiment in the market has shifted from cautious observation to a belief that there may be broader issues within the banking sector, especially as many regional banks have yet to report earnings [7][8].