Regional bank stocks slide after two banks disclose bad loans
The KBW Nasdaq Regional Banking Index (KRX) sank 5.7% in Thursday afternoon trading, its biggest drop since April, following the disclosures by two banks of irregularities related to some loans.
After Wednesday's close, Zions Bancorporation (NASDAQ:ZION) said it found "apparent misrepresentations and contractual defaults" by the borrowers and supporting collateral when it reviewed two related loans made by its California Bank & Trust division. Zions took a provision for the full $60M outstanding under the loans.
On Thursday, Western Alliance Bancorporation (NYSE:WAL) said it sued a borrower, alleging fraud in failing to provide collateral loans in first position, among other claims.
Zions (NASDAQ:ZION) stock plunged 12% and Western Alliance (NYSE:WAL) tumbled 10% in Thursday trading.
That apparently has investors wary of other regional banks. Among the biggest decliners in the sector: Flagstar Financial (NYSE:FLG) -6.4%, Banc of California (NYSE:BANC) -8.0%, Webster Financial (NYSE:WBS) -5.8%, Metropolitan Bank Holding (NYSE:MCB) -6.1%, Axos Financial (NYSE:AX) -6.6%, and Bank OZK (NASDAQ:OZK) -5.2%.
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