Jefferies, Zions, Western Alliance Stocks Hit By Credit Risk Concerns

Shares of Jefferies (JEF) and several regional U.S. banks dropped Thursday afternoon after two regional lenders disclosed loan-related issues tied to allegations of fraud, raising investor concerns over borrowers’ creditworthiness.

On Thursday, Western Alliance (WAL) filed with the Securities and Exchange Commission (SEC) that a borrower failed “to provide collateral loans in first position,” raising fraud allegations and further unsettling markets. This came on the heels of Zions Bancorp (ZION) reporting on Wednesday that it would take a $50 million charge-off tied to commercial and industrial loans, signaling potential stress in its lending portfolio.

ZION’s stock was down more than 12% in afternoon trade. However, retail sentiment around the stock on Stocktwits jumped to ‘extremely bullish’ from ‘neutral’ territory with chatter surging to ‘high’ from ‘low’ levels over the past day.

WAL’s stock fell nearly 10% but also saw an improvement in sentiment. Platform data showed a rise to ‘neutral’ from ‘bearish’ territory, accompanied by ‘high’ levels of message volume, over the past day. 

Meanwhile, Jefferies’ stock fell as much as 8.8%, with retail sentiment on Stocktwits in ‘bearish’ territory amid ‘extremely high’ levels of chatter. The investment bank reported earlier this week that it has “limited” exposure to First Brands, an auto parts supplier that declared bankruptcy in September.

This comes after JPMorgan (JPM) CEO Jamie Dimon stated during the bank’s third quarter (Q3) earnings call, “When you see one cockroach, there are probably more,” as cited by Koyfin, referring to the bankruptcies of First Brands and subprime auto lender Tricolor Holdings. JPMorgan wrote off $170 million in the third quarter related to the Tricolor bankruptcy, and said it is reviewing its controls, with Dimon describing the bank's exposure as "not our finest moment."

JPM’s stock fell around 2% in afternoon trade on Thursday. Retail sentiment around the company moved higher within ‘extremely bullish’ territory with chatter at ‘extremely high’ levels over the past day. 

Read also: Bitfarms Slides On $300 Million Offering After Rallying To Near 4-Year High, Retail Buzz Stays Elevated

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