First Horizon shares are down 13% over the past 10 days following management comments that they would consider opportunistic, in-footprint M&A in 2026 and beyond. Investors had previously viewed First Horizon as a potential near-term seller, so this was perceived as a shift in messaging. While the comment acknowledges a more active M&A environment, it appears to have been a communication misstep, not one related to any credit concerns.

Western Alliance (-19% over the past 10 days), with approximately $87 billion in assets, disclosed in an 8-K filing yesterday that it has filed a lawsuit against a borrower (Cantor Group V, LLC) alleging fraud on a revolving credit facility note financing. The credit is secured by commercial real estate loans and cash proceeds, and Western Alliance believes the collateral fully covers the obligation. The exposure represents about 1.6% of tangible common equity. While not material to the balance sheet, this development is likely to raise questions about loan book quality ahead of the 3Q25 results.

Zions Bancorporation (ZION, -17% over the past 10 days), with approximately $89 billion in assets, disclosed in an 8-K filing that it recently became aware of legal actions by two other banks against parties apparently affiliated with its borrowers. This prompted an internal review of the related borrowers at California Bank & Trust, Zions’ C&I lending division. During the review, the bank determined that the borrowers had made misrepresentations. As a result, Zions will record a $60 million provision (covering the full amount of the loans) and a $50 million charge-off, both to be reflected in the 3Q25 results. The bank intends to pursue legal options to recover any losses. The exposure represents about 1.1% of tangible common equity. While the development will draw investor scrutiny, Zions maintains adequate capital levels.

Companies such as Apollo, KKR, and Ares have significant exposure to the private credit market, with the first two having well over 50% of AUM in that segment and KKR around 40%. While these firms have reported solid earnings so far, investors have become increasingly cautious about the associated risks. Share price performance reflects these concerns, as these companies have underperformed this year, following a strong run in 2024 ahead of the US presidential election.

These events are undoubtedly affecting sentiment, as they are increasingly viewed not as isolated incidents but as part of a broader pattern following the collapses of auto-parts maker First Brands and auto lender Tricolor, both of which left credit investors nursing losses and are now under US Department of Justice scrutiny.

Yesterday’s announcement is likely to reignite credit concerns across the banking sector, even though reported credit metrics remain benign among banks that have released results so far.