US bank stocks stabilized on Friday after a sharp selloff, with regional lenders’ earnings easing concerns over credit quality. The S&P Regional Banks Select Industry Index rose 1.7%, led by Zions Bancorp NA and Truist Financial Corp, following a 6.3% plunge on Thursday due to fraud on loans to distressed commercial mortgages.

Earnings reports from Truist Financial Corp., Regions Financial Corp., and Fifth Third Bancorp helped alleviate worries of credit stress spreading, with lower provisions for credit losses than expected. Ally Financial Inc. also showed strong results, indicating continued demand for car loans among lower-income consumers.

Investor sentiment improved as Trump mentioned progress in negotiations with China, boosting shares of big banks and the broader market. Prior to the selloff, JPMorgan Chase & Co. CEO Jamie Dimon’s warning of potential further issues had already heightened credit concerns.

The global banking sector faced a downturn on Friday due to credit worries, with Europe’s Stoxx 600 Banks Index dropping over 2% and Asian bank stocks also falling. Investors expressed concern over unidentified risks, leading to increased implied volatility and demand for protective options in regional banks.

Despite the selloff, some analysts believed the sector had been oversold. Baird analyst David George upgraded Zions, stating that the market capitalization drop was excessive. RBC Capital Markets analyst Jon Arfstrom noted that regional banks remain well reserved for potential losses and have increased capital levels since 2023.

Read more at Yahoo Finance: Bank Stocks Recoup Some Losses as Earnings Ease Credit Fears