American regional bank loan risks trigger market panic, three major indices all fell.

The American stock market plunged significantly on Thursday, with regional banks hit the hardest as investors worried about a tougher credit market ahead. Two bankruptcies in the automotive industry triggered a chain reaction, putting the quality of bank loans back in the spotlight. JPMorgan Chase CEO Jamie Dimon mentioned the bankruptcies of subprime auto loan company Tricolor Holdings and auto parts manufacturer First Brands earlier this week, saying, "When you see one cockroach, there are often more behind it." This statement sparked widespread concern in the market about credit risk. Following this, regional bank Zions Bancorporation, N.A. revealed after the market closed on Wednesday that several banks and lending institutions have filed lawsuits against it over two commercial and industrial loans to related parties, announcing write-offs of $50 million in the third quarter and provisions of $60 million. After the news was announced, Zions Bancorporation, N.A. shares plummeted by 13.14%, with analysts speculating that the loans in question may be related to Tricolor and First Brands. Analyst David Smith from Truist pointed out that investors should not overreact to the incident, as the bankruptcies of the two companies were already known, and Zions Bancorporation, N.A.'s lawsuit occurred in California and is not directly related to the two companies. However, he also admitted that such credit events "undoubtedly heighten concerns in the market about the asset quality of regional banks." Evercore ISI analyst John Pancari stated that Zions Bancorporation, N.A. classified the loans in question as non-depositary Financial Institutions, Inc. (NDFI) loans, noting that this is just one of several recent fraud and bankruptcy incidents in this area. NDFI risk exposure has become one of the main concerns for investors. Data shows that NDFI loans currently account for about one-third of total commercial and industrial loans for large U.S. banks. Besides Zions Bancorporation, N.A., banks such as PNC Financial, Wells Fargo & Company, KeyCorp, First Horizon, Regions Financial Corporation, Synovus Financial, and U.S. Bancorp are also exposed to high-risk loans in this category. Another regional bank, Western Alliance Bancorp, saw a sharp drop in its stock price of over 10% due to its high concentration of NDFI loans. Despite reiterating its full-year guidance in regulatory filings and stating that collateral is sufficient to cover risky loans, investor confidence remains shaken. Due to credit concerns, the KBW Regional Banking Index fell by 4.8%, marking its largest single-day decline since April 10. The Dow Jones Industrial Average fell by 0.7%, the S&P 500 fell by 0.8%, and risk aversion in the market significantly increased. Analysts believe that the impact of the two bankrupt companies may still be isolated incidents. Sevens Report President Tom Essaye pointed out that if Tricolor's bankruptcy is due to low-income consumers being unable to repay loans due to high interest rates, it may reflect multiple pressures on the grassroots economy in the U.S., such as tariffs, inflation, and slowing employment, which could lead to broader risks in subprime loans. As for First Brands, its issues stem more from relying on private equity and hedge fund credit, with some financing being accused of fraud, including "double-pawning the same asset." If such practices spread, it could impact the credit stability of Wall Street lending institutions. However, most economists believe that these events have not yet posed systemic risks. Essaye stated, "It is more likely management made serious mistakes in financing decisions, rather than a complete economic deterioration."