MW 'Zero parallels with 2008' - the regional banking crisis is a buying opportunity, says Citi

By Jules Rimmer

Recent concerns about regional banks began with Zions Bank reporting losses with a distressed commercial real-estate fund.

After recent and well-publicized credit issues among regional banks, analogies had been drawn in some quarters not just with the Silicon Valley Bank panic of 2023, but even with the 2008 global financial crisis.

These comparisons are way off the mark and wholly unjustified. This was the emphatic conclusion of Citi's financials analyst Keith Horowitz, and head of credit strategy, Michael Anderson. They took part in a live webcast, arranged by Citi, to deal with questions from investors who were concerned that last week's high profile credit failures were potentially a sign of deeper systemic risks.

JPMorgan CEO Jamie Dimon's now-notorious cockroach quote got a lot of airplay and only served to heighten investors' worries.

Horowitz was dismissive of the suggestion there was a significant issue for regional banks. "There is no correlation with 2008, I have buys on all regional banks, there are zero parallels and what we have here is simply fraud," he says.

He was referring to the announcements from Zions Bancorp $(ZION)$ and Western Alliance $(WAL)$ that they had delinquent loans with the same borrower, a commercial real estate firm called Cantor. Zions referred to "apparent misrepresentations" as Western Alliance alleged fraud. JPMorgan $(JPM)$ also reported a $170 million loss on a loan to subprime auto lender, Tricolor.

Horowitz stated that 95% of the banks under his coverage reported no credit problems whatsoever, that delinquencies were running either in line with expectations or better and that consumer spending patterns were positive.

The primary focus of recent disquiet about possible credit contagion has been lending to non-depositary financial institutions, or NDFIs. Horowitz calculates this represents about 20% of lending in the regional banking sector, mostly via asset securitization with a low risk of default.

Quizzed about the auto sector, the source of recent defaults by First Brands and Tricolor, Horowitz again reassured investors that there were no problems and the sector was "absolutely pristine." He went on to explain that auto loans were generally short duration and most of those that might cause a problem were issued in 2022 before rates were jacked up. Now, though, these are mostly matured and only represent about 10% of loan books. The banks are well set for 2026 and 2027.

Credit strategist Michael Anderson was similarly confident of no genuine cause for anxiety. Credit spreads for banks are approximately 15 basis points tighter than last quarter, no revealing no signs of stress. and he's confident that bank lending is still in an expansionary cycle, propelled by deregulation, Fed rate cuts, strong M&A and a robust equity market. The specific problems experienced in the last month by regional banks he views as "idiosyncratic."

Citi's chief U.S. economist Andrew Hollenhorst also joined the call to confirm that the Fed won't react at this stage because the losses incurred are way too small to move the needle, no tightening of financial conditions have been recorded and no genuine signs of real risk-off sentiment or aversion to bank-to-bank lending are visible.

Horowitz observed that third-quarter bank earnings were coming in well so far and credit metrics were good. Payments and wealth management are generating fee income while capital levels are robust.

He expects regional banks to actually outperform bigger banks in the next twelve months because many of them are sitting on unrealized losses on their loan book that will most likely never be realized and will ultimately provide earnings momentum, contributing to double-digit earnings per share growth in the next few years. He likes the sector and his top picks are Ally $(ALLY)$ US Bancorp $(USB)$ and Citizens Bank $(CFG)$.

Interestingly, Zions reported third-quarter numbers last night that were better than anticipated and the stock is trading at $53.47 in Tuesday pre-market versus $55 before the storm broke.

-Jules Rimmer

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October 21, 2025 05:25 ET (09:25 GMT)

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