US bank stocks tumbled on Thursday as investors grew increasingly anxious about credit risks in the sector, following fresh disclosures of loan losses and fraud allegations linked to bankrupt auto firms.
Shares of Zions Bancorporation, Jefferies, and Western Alliance led the sell-off, dragging down regional banking indices and weighing on broader Wall Street sentiment. The KBW Regional Banking Index fell 5.8%, while the S&P 500 slipped nearly 1%.
Zions plunged 12% after announcing a $50 million loss on two commercial and industrial loans from its California division. Western Alliance dropped 11% after revealing a lawsuit alleging fraud by a borrower, Cantor Group V LLC.
Investment bank Jefferies lost 9%, extending losses since the bankruptcy of auto parts manufacturer First Brands, to which it had significant exposure.
Analysts said the developments underscore the fragility of credit quality in the US banking sector.
“Poor-performing loans at one bank can drag down the group quite fast,” said Stephen Biggar, banking analyst at Argus Research.
The turmoil comes amid renewed scrutiny of risk controls following the collapses of First Brands and subprime lender Tricolor, which have together exposed vulnerabilities in the opaque private credit market.
JPMorgan Chase CEO Jamie Dimon warned earlier this week that the wave of bankruptcies could reveal broader credit risks. JPMorgan wrote off $170 million in the third quarter related to Tricolor’s failure.
“When you see one cockroach, there are probably more,” Dimon cautioned.
While some analysts view the incidents as isolated, others say they highlight systemic weaknesses similar to those seen during the Silicon Valley Bank collapse in 2023 — when interest-rate pressures and deposit flight triggered turmoil across regional lenders.
The recent selloff has revived fears that credit stress, fraud, and poor transparency could once again threaten confidence in mid-sized US banks — a sector whose volatility has historically spilled over into global financial markets.