Zions Faces $50 Million Loan Loss as U.S. Regional Banks Navigate Credit Market Jitters

(Reuters) — Shares of U.S. regional banks slipped on Thursday after Zions Bancorporation announced a $50 million charge in the third quarter tied to two commercial and industrial loans from its California division.

The disclosure stirred renewed investor attention toward potential credit risks, as lenders continue to adapt to high interest rates and broader economic uncertainty.

Analysts at Raymond James noted that the incident “raises valid questions about Zions’ underwriting and risk management policies,” though they emphasized it appears to be an isolated case rather than a systemic issue.

Recent bankruptcies involving auto parts manufacturer First Brands and subprime lender Tricolor, coupled with fraud allegations, have reignited scrutiny of credit market transparency. Complex loan structures and new financial vehicles have made assessing exposure more challenging.

Still, many experts maintain perspective.
“Bankruptcies and fraud are part of normal market cycles—it doesn’t necessarily indicate a systemic problem,” said David Wagner, head of equities at Aptus Capital Advisors.

Zions’ stock declined about 8.6% in afternoon trading. The bank confirmed it had filed a lawsuit in California to recover the affected funds and expects to recognize the charges within the current quarter.

“Zions now needs to demonstrate that this event is isolated and not reflective of broader weaknesses in oversight,” said Brian Mulberry of Zacks Investment Management.

Western Alliance Bank also came under focus after disclosing a separate lawsuit alleging fraud involving Cantor Group V, LLC. The Arizona-based lender assured investors that its criticized assets—loans identified as weaker—remain below previous levels as of June 30. Shares fell 7.8% but later pared losses.

Analysts cautioned that further disclosures could lead to renewed pressure on the regional banking index, which ended the day down nearly 4%.

The developments come amid ongoing discussion about transparency in private credit markets, following comments by JPMorgan Chase CEO Jamie Dimon regarding rising caution after recent bankruptcies. JPMorgan itself wrote off $170 million related to Tricolor and said it was reviewing its internal controls.

“When you see one problem, there’s often more beneath the surface—so vigilance is key,” Dimon remarked earlier this week.

Despite the turbulence, analysts say the situation remains manageable, with most regional banks maintaining strong capital positions and proactive oversight to navigate current credit conditions.