Western Alliance, KeyCorp Fall. Report Says Yellen Notes More Bank Mergers May Be Needed.

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Bank stocks slumped Friday after a report said Treasury Secretary Janet Yellen told bank chief executives that more bank mergers may be necessary.

Shares of regional banks were tumbling Friday.

Western Alliance Bancorp.

(ticker: WAL) shed 2.9%,

KeyCorp

(KEY) lost 2.2%, and

Zions Bancorp

(ZION) slid 3.1%. Shares of regional lenders have seen wild swings higher and lower since Silicon Valley Bank collapsed in March,

Credit Suisse

folded and was snapped up by fellow Swiss bank

UBS

(UBS), and after

First Republic Bank

was sold to

JPMorgan Chase

following a run on the bank’s deposits.

Banking giants also traded lower, with

JPMorgan Chase

(JPM) down 0.4%,

Citigroup

(C) down 1%,

Morgan Stanley

(MS) off 2.3%,

Goldman Sachs

(GS) down 1%,

Bank of America

(BAC) down 0.9%, and

Wells Fargo

(WFC) slipping 0.5%.

Yellen met Thursday with JPMorgan CEO Jamie Dimon and

Citigroup

CEO Jane Fraser, as well as other board members of the Bank Policy Institute in Washington, according to a report from CNN that cited two people familiar with the matter. During the meeting, she told leaders that more bank mergers may be necessary as the sector continues to steer its way through turmoil.

However, according to a readout from the U.S. Department of the Treasury on Thursday, “Yellen reaffirmed the strength and soundness of the U.S. banking system, noting that it remains well-capitalized with strong liquidity.” The readout didn’t mention anything about bank mergers.

Write to Emily Dattilo at emily.dattilo@dowjones.com