Bank stocks rebound Friday as credit fears ease
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Bank stocks recovered Friday as three regional banks reported earnings — with none flagging any new trouble spots in their loan books.
Why it matters: Investors are looking for any clues as to whether recent fears about credit quality are just smoke, without fire.
Driving the news: Fifth Third Bancorp Friday said it took a magnifying glass to its asset-backed finance portfolio after allegations of fraud tied to the collapse of a subprime auto lender emerged in September.
- The bank told investors that it tracked over 120,000 vehicle identification numbers tied to its loan collateral — and found issues with only two.
- Huntington Bancshares CEO Stephen Steinour, asked about credit quality Friday morning, told analysts: "We're not seeing anything at this point that concerns us."
- Regions Financial reported improved metrics across business lending. It said its loans flagged as higher-than-normal risk fell by nearly $1 billion during the quarter.
Market impact: The KBW Bank index, which fell 3.6% yesterday in its worst sessions since April, closed up 0.6% Friday.
- Fifth Third, Huntington and Regions all closed with small gains.
- Thursday's biggest decliners — which helped spark the selloff with bad loan disclosures — also rebounded: Zions Bancorp closed up 5.8% Friday, while Western Alliance rose 3.1%.
Flashback: Just two years ago Silicon Valley Bank's collapse exposed liquidity and risk mismanagement issues that spread across the regional banking sector.
Yes, but: Today, banking executives and analysts say things appear more contained.
What they're saying: I don't sense any kind of systemic problem in the banking system among the regional banks," Moody's Analytics chief economist Mark Zandi told Yahoo Finance Friday. Credit quality broadly in good, he said, despite "some pockets of weakness."
- "This is an industry where investors — especially those that are new to this sector — tend to 'sell first and ask questions later,' especially when it comes to elevated credit concerns," JPMorgan analyst Anthony Elian wrote in a note Thursday.
