A chorus of concerns about AI and risky lending has bank investors spooked.
Shares in big lenders and investment banks sold off sharply Friday after new credit issues emerged and fears of broader economic implications from artificial intelligence weighed on investors.
Bank of America, Citigroup and Wells Fargo all closed down more than 4%, while Goldman Sachs and Morgan Stanley both fell over 6%. JPMorgan Chase, the biggest U.S. bank, lost 2%.
The KBW Nasdaq Bank Index fell 4.85%, its largest one-day drop since last April's tariff turmoil. The country's largest lenders tend to be a proxy for investors' beliefs about the economy.
The selloff appeared to be a continuation of AI-related concerns that have roiled markets in recent weeks.
Payments company Block's decision to lay off 40% of its staff thanks to AI gains further fueled the belief that technological advancements could lead to broad job losses. That came on the heels of a report earlier this week that had investors worried about dramatic economic and job market implications of AI.
Consumer lenders, more vulnerable during economic recessions, were among the worst performers Friday including American Express, Capital One and Synchrony Financial.
Wobbling confidence in private-credit lenders has further jolted the financial sector. Several high-profile loan losses last year spurred a recent rise in redemption requests from individual investors in private-lending vehicles. On Friday, two publicly traded funds from private lenders said they were cutting their dividends, further adding to concerns.
Investors have reacted sharply to other signs more losses could be coming. They found a new example this week in the collapsed U.K. financing company Market Financial Solutions.
Market Financial Solutions offered developers and wealthy investors bridge loans on properties in London and elsewhere in the U.K., a specialty market that lets property purchasers act fast before arranging longer-term funding. Investment vehicles set up to make the loans were funded by at least half a dozen global banks and asset managers.
But in recent months, the payments stopped going into the designated accounts of the investment vehicles, according to documents in London business court. Two of the investment vehicles entered insolvency proceedings earlier this month.
Jefferies slid 9% and Barclays fell 4% on worries about the collateral on loans they made to the company.
Weakness in tech stocks and more conservative lending could also dampen what was expected to be a banner year for mergers and acquisitions and initial public offerings, said Ebrahim Poonawala, an analyst at Bank of America Merrill Lynch.
"You came in with a relatively optimistic outlook for the year, and now investors are running into risk factors that weren't necessarily at the top of their lists," he said. "Fear begets fear."
Write to Ben Glickman at ben.glickman@wsj.com
(END) Dow Jones Newswires
February 27, 2026 16:28 ET (21:28 GMT)
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