"NDFIs Are The New Alt-A": BofA Warns Of "Forced Selling" If Private Credit Issues Persist... But Is It Really That Bad

As BofA's Savita Subramanian writes in the first edition of her Q3  earnings tracker series (note available here for pro subs), big banks posted solid beats across the board, and reiterated the bullish themes from 2Q: consumer resilience, strong deal pipeline, regulatory tailwinds.

But despite solid results, the KBW Bank Index lagged last week. And while big banks cited a mostly benign credit backdrop with stable delinquency trends, Zions Bancorp’s $50 million charge-off disclosure related to two C&I loans sent regionals tumbling. Another “one-off” headline, this time from Western Alliance, added to concerns, just after Jamie Dimon warned of “probably more” credit cockroaches to come. And all of happened in the immediate aftermath of the Tricolor and First Brand bankruptcies, which combined concerns about bad/rehypothecated credit with outright fraud, sparking panic that not only are there cockroaches, but that bank loan officers have done little to no diligence this cycle, and the damn is just waiting to be unleashed.