Bank Stocks Tumble Amid Credit Fears

Credit defaults at regional US banks have investors on edge. European banks are feeling the strain as the weekend approaches.

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2025 October 19 . 6:01 PM

1 min read

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Bank Stocks Tumble Amid Credit Fears

Markets are on edge as investor sentiment wavers between hope for a weekend calm and fears of escalating credit issues. European bank stocks are feeling the heat from the tense atmosphere surrounding US banks.

Large US banks like JPMorgan and Bank of America have seen significant gains this year, up 24% and 14% respectively. However, the picture is not as rosy for all. Zions Bancorporation and Western Alliance Bancorp have taken a hit, falling by 13.1% and 10.8% in the US. Recent nervousness about credit defaults at Tricolor and the collapse of First Brands Group has sparked memories of the 2023 regional bank crisis. Jefferies has lost 38%, while Zions and Western Alliance have shed 13% and 15% since the start of the year.

The troubles at Western Alliance and Zions Bancorporation are linked to fraud allegations involving borrowers failing to provide collateral. Western Alliance is set to reclaim around $100 million, while Zions has announced a $50 million write-down on a loan. JPMorgan Chase and Fifth Third Bancorp have also disclosed significant losses tied to defaults by companies like Tricolor Holdings and First Brands Group. These developments have raised concerns about credit quality and the potential for further credit problems in the regional banking sector.

Unlike the 2023 crisis, there's no bank run or government bond problems this time. Yet, the situation remains delicate. Zions Bancorporation and Western Alliance Bancorp have had to write off loans to a fund suspected of embezzlement, adding to the uncertainty. As the weekend approaches, all eyes are on whether the situation will stabilize or worsen.