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Regional banks: Credit crisis or contained issues?

October 22, 2025

Regional U.S. banks were back in the spotlight in mid-October – prompting market fears about deteriorating credit. Zions Bancorp’s $50m charge-off from a loan issued by a wholly owned subsidiary, claiming fraudulent behavior by the borrower, followed by Western Alliance confirming exposure to the same borrower credit escalated concerns. This comes weeks after bankruptcies of Tricolor, a subprime auto lender, and First Brands, an auto parts supplier. However, early evidence suggests these cases are isolated and not a broader systemic issue, believes Garrett Melson, Portfolio Strategist, Natixis Investment Managers Solutions. “On net, banks have been tightening standards across commercial real estate, commercial and industrial loans (see chart), and consumer loans for going on three years now,” said Melson.

 

Senior Loan Officer Survey: Commercial & Industrial Loans Lending Standards (10/31/13 – 7/31/25)
Senior Loan Officer Survey: Commercial & Industrial Loans Lending Standards (10/31/13 – 7/31/25) *Source: Bloomberg
  • The Senior Loan Officer Opinion Survey on Bank Lending Practices is conducted by the Federal Reserve several times a year to address changes in the standards and terms on, and demand for, bank loans to businesses and households.
  • Regarding loans to businesses over 2Q 2025, survey respondents reported tighter lending standards and weaker demand for commercial and industrial loans to firms of all sizes. Furthermore, banks generally reported tighter standards and weaker demand for commercial real estate loans.* 
  • Overall, banks reported that levels of standards are currently on the tighter end of the range for all loan categories.*

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.

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