US regional banks’ earnings to gauge investor confidence after credit risk jitters
Investor sentiment toward U.S. regional banks will be put to the test this week as several lenders release quarterly earnings reports following renewed concerns over loan losses and fraud cases that rattled markets.
The anxiety stems from isolated issues that have reignited fears of broader weakness across the sector — a reflection of how fragile confidence remains since the 2023 banking crisis, analysts say, News.Az reports, citing Reuters.
“Years of easy credit and low transparency have left investors uncertain about where risks truly lie,” said Tim Hynes, Global Head of Credit Research at Debtwire. “Even small negative surprises can spark outsized market reactions.”
The KBW Regional Banking Index has fallen 6.1% this month, lagging behind the KBW Bank Index, which tracks large-cap banks and has risen 13.5%.
Last week, Zions Bancorporation revealed losses tied to two loans, while Western Alliance filed a lawsuit alleging fraud by Cantor Group V, LLC, which has denied the accusations. Zions is set to report its third-quarter results later on Monday, with its shares up 1.9% in premarket trading despite a 12% decline so far in October.
The SPDR S&P Regional Banking ETF (KRE) edged up 0.7% in premarket trading. Meanwhile, HBT Financial reported a rise in non-performing assets to $8.6 million, or 0.17% of total assets, from $6.5 million (0.13%) last quarter. Its shares gained 4% after announcing a $170.2 million merger with CNB Bank.
Jefferies shares also rose 1.9%, with the investment bank emphasizing that losses from its exposure to the First Brands collapse are “absorbable.”
Among other lenders, Washington Trust Bancorp will soon release results after warning that its third-quarter profit will be reduced by $11.3 million in loan losses.
The coming days are expected to reveal whether recent troubles are isolated incidents or early warnings of deeper challenges within the regional banking sector.
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