Newsquawk Analysis: Regional banking woes continue despite solid regional reports this morning

Analysis details (12:15)

• On Thursday, notable global risk-off trade was seen on a reignition of regional banking woes after Western Alliance (WAL) and Zion Bancorp (ZION) announced exposure to bad loans tied to fraud, adding to the concerns following the collapse of Tri-Color and First Brands. The regional banking ETF KRE closed down in excess of 6%, while the broader Financial sector saw weakness of almost 3%.


• As we head into Friday’s open, sentiment continues to be weighed on with US equity futures extending on weakness (ES -0.8%, NQ -1%) with RUT (-1.2%) underperforming and weighed on by the regional bank losses.


• WAL (-1.4%) continues falling, although ZION (+1.2%) is now firmer and wiped out earlier pre-market losses with some positive analyst commentary. Baird believes Zions shares have been unduly punished, with the analyst noting the USD 1bln market cap wipeout is “excessive”, adding the fraudulent nature of the borrowers hints at a unique situation rather than an underlying systematic issue. The Baird analyst applauded the cos. "solid" fundamental trends, and noted that its track record of strong underwriting quality should help prevent further losses.


• There has been a couple of regional bank reports Friday BMO – Regions Financial (RF) (+0.6%), Truist (TFC) (+1.8%), and Huntington Bancshares (HBAN)  (+2.3%) are firmer, Fifth Third Bancorp (FITB) is flat, while Comerica (CMA) (-0.8%) sees slight losses. Overall, none of the names have raised any new credit concerns, with Regions Financial stated “Asset quality metrics remained stable to improving during the most recent quarter”, and Huntington “Credit quality remains top tier, with net charge-offs at 0.22% and stable asset quality metrics”.


• However, FITB Net charge-offs rose 200mln Q/Q to USD 339mln, with USD 178mln related to an impairment of an asset-backed finance commercial credit.


• In terms of provisions for credit losses metrics, FITB 197mln (exp. 239mln), TFC 436mln (exp. 484.9mln), RF 105mln (exp. 129.1mln).


• Away from the regionals, the heavy hitters JPM, MS, GS, C, BAC, WFC are all seeing losses more than a percent amid the concerns, with JPMorgan’s CEO Dimon offering concerning comments in the last couple of days. On First Brands, he warned "When you see one cockroach, there are probably more", and yesterday he said markets think everything is going to be fine "but I am not so sure".

17 Oct 2025 - 12:15- EquitiesResearch Sheet- Source: Newsquawk