U.S. regional bank stocks fell on Thursday after Zions Bancorporation disclosed it would take a US$50-million loss in the third quarter on two commercial and industrial (C&I) loans from its California division.

The disclosure added to growing investor unease about hidden credit stress as lenders navigate elevated interest rates and economic uncertainty.

“The optics of a large balance C&I loan to a fraudulent borrower from a bank that specializes in small balance C&I loans is not great, and puts into question Zions’ underwriting standards and risk management policies,” Raymond James analysts said in a note.

The bankruptcies of auto parts maker First Brands and subprime lender Tricolor, and recent fraud allegations, have put a spotlight on the risk controls of banks and the opaque credit

See Full Page