Shares of U.S. regional banks fell sharply on Thursday, dragging down investment firm Jefferies, amid growing concerns about non-performing loans in the private credit sector. The SPDR S&P Regional Banking Index (KRE) lost more than 6%, with all but one of its components down. Zions Bancorporation fell more than 12%, while Western Alliance Bancorp was down over 11%, after acknowledging a charge relating to bad loans and a case of customer fraud, respectively.
Jefferies, exposed to the bankruptcy of First Brands, saw its stock fall 9%, bringing its monthly decline to 23%, its worst performance since March 2020. The bank disclosed $715m in exposure to companies linked to First Brands, while UBS acknowledged a $500m risk. These cases, along with the bankruptcy of Tricolor Holdings in the automotive sector, brought back memories of the risky lending practices that had weakened certain financial institutions during the 2023 crisis, triggered by the collapse of Silicon Valley Bank.
Concerns spread to private credit managers, with Blue Owl Capital losing nearly 6%, Ares Management and Blackstone more than 4%, and Apollo and Carlyle around 5%. The big banks resisted better, however, with JPMorgan only down about 1%, while Bank of America fell slightly more (-3%).
