No signs of systemic risk in loan books, say executives
Bank stocks recovered Friday after earnings from Fifth Third Bancorp, Huntington Bancshares, and Regions Financial showed no major credit issues. The reports eased investor fears following recent turmoil triggered by subprime auto loan fraud and broader concerns about credit quality.
Fifth Third, under scrutiny due to the September collapse of a subprime auto lender, said it thoroughly examined over 120,000 vehicle identification numbers linked to its loan collateral. The bank found issues with only two, suggesting limited exposure to the alleged fraud.
Improving credit metrics calm investor nerves
Huntington Bancshares CEO Stephen Steinour addressed credit concerns during Friday’s earnings call, stating, “We’re not seeing anything at this point that concerns us.” Meanwhile, Regions Financial reported that its higher-risk loans dropped by nearly $1 billion this quarter, signaling improved credit quality.
The KBW Bank Index, which had plunged 3.6% on Thursday — its worst drop since April — rebounded with a 0.6% gain Friday. Stocks of the three banks closed higher, with Fifth Third, Huntington, and Regions all posting small gains.
Subprime concerns fade as sector stabilizes
Thursday’s biggest decliners also recovered. Zions Bancorp closed up 5.8%, and Western Alliance rose 3.1%, rebounding from sharp losses driven by loan disclosure fears.
Moody’s Analytics chief economist Mark Zandi told Yahoo Finance that while “some pockets of weakness” remain, there is no evidence of a broader crisis. “I don’t sense any kind of systemic problem in the banking system among the regional banks,” he said.
Analysts urge caution, but see no crisis
While credit concerns remain top of mind, analysts argue the panic may be overblown. JPMorgan analyst Anthony Elian noted the sector’s tendency to face sharp selloffs during uncertain times. “This is an industry where investors — especially those that are new to this sector — tend to ‘sell first and ask questions later,’” he said in a Thursday note.
For now, the recovery in regional bank stocks suggests that recent fears may have been premature, with current data showing stability in the sector’s core loan portfolios.
