Wall Street Rattled by Rising Bank Write-Offs and Credit Warnings

Wall Street’s credit jitters have deepened following JPMorgan Chase CEO Jamie Dimon’s stark warning about hidden risks in the US economy. On Thursday, shares of several regional banks tumbled sharply after fresh signs of loan troubles emerged. Zions Bancorporation fell 13% after revealing a $50 million charge-off tied to two California-based business loans, while Western Alliance Bancorporation slid nearly 10% after filing a fraud lawsuit against one of its borrowers, Cantor Group V LLC.

The developments follow recent bankruptcies at subprime auto lender Tricolor and auto parts maker First Brands, which have heightened market concerns about deteriorating credit quality among corporate borrowers. Although Western Alliance clarified its case was unrelated to those bankruptcies, investor sentiment remained fragile.

Jefferies Financial Group was also drawn into the turmoil, with filings showing its asset management unit holds $715 million in receivables linked to First Brands’ customers. Executives have downplayed the impact, calling market reactions “meaningfully overdone.”

Adding to the unease, JPMorgan disclosed a $170 million charge-off tied to its lending to Tricolor, prompting Dimon to admit it was “not our finest moment.” Analysts say the surge in lending to non-bank financial institutions — the fastest-growing segment this year — has sparked renewed scrutiny, though Jefferies analysts maintain the structure of such loans should keep overall credit performance stable.