Axos Financial (AX) Faces Allegations of Concealing Risks and Unconventional Lending Practices – Hagens Berman

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Axos Financial Faces Allegations of Concealing Risks and Unconventional Lending Practices

In a recent investigation, activist short seller Hindenburg Research has turned its attention to Axos Financial, Inc. (NYSE: AX), a regional bank. The report alleges that Axos has deliberately hidden known risks related to its lending practices and the overall health of its loan portfolio.

Commercial Real Estate Exposure Raises Concerns

Hindenburg’s detailed analysis reveals that Axos has significantly increased its exposure to commercial real estate (CRE) loans. Despite the CRE sector’s struggles since the COVID-19 pandemic, Axos has doubled down, with CRE loans now constituting more than half of its total loan portfolio. This stands in stark contrast to industry trends, as a 2023 Moody’s study found that regional banks typically have an average CRE exposure of only 16.5%.

Lax Underwriting Standards and Potential Defaults

The report also highlights concerns about Axos’ underwriting standards. Interviews with former employees suggest that the bank may have been willing to lend to borrowers rejected by other financial institutions, including individuals with criminal histories and precarious financial situations. Such leniency could result in a significant number of loan defaults in the future.

Questionable Accounting Practices

Furthermore, the investigation raises red flags regarding Axos’ accounting practices. While the bank’s credit metrics appear strong, there are doubts about their accuracy. Loan-to-value ratios seem lower than industry norms, and non-performing loan rates remain suspiciously stable. The report suggests that Axos may be manipulating these figures to present a more optimistic picture to investors.

As the allegations unfold, investors and industry experts will closely monitor Axos Financial’s response and actions. The bank’s reputation and financial stability hang in the balance.

“We’re investigating whether Axos may have misled investors about its loan portfolio,” said Reed Kathrein, the Hagens Berman partner leading the investigation.

If you invested in Axos Financial and have substantial losses submit your losses now »

If you’d like more information about the Axos Financial investigation, read more »

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