The big U.S. banks JPMorgan Chase & Co. (JPM) - Get Report , Bank of America Corp. (BAC) - Get Report and Citigroup Inc. (C) - Get Report are reducing loans to retailers, squeezing their finances at a time when the embattled industry is also facing growing skepticism from bond investors.

JPMorgan, the largest U.S. bank by assets, trimmed its total exposure to consumer and retail companies by 3.6% last quarter to $87 billion as of Sept. 30, even as the total for all corporate borrowers climbed by about 1%, according to a regulatory filing on Wednesday, Nov. 1. Bank of America slashed its exposure to retailing by 7.7%, while Citigroup pared consumer, retail and health loans and commitments to 16% of its overall corporate portfolio, from 17% on June 30, filings showed earlier in the week.

Retailers have been hit hard by a drop in consumer spending and a decade-long shift toward online shopping, eroding their creditworthiness and pushing some into default. Standard & Poor's lowered Under Armour Inc.'s (UA) - Get Report credit rating on Tuesday by one notch to BB, indicating that the clothing-maker faces adverse conditions that could hamper its capacity to make debt payments.

"Smaller, highly leveraged retailers are struggling to keep up, which is pushing defaults and downgrades higher," Moody's Investors Service, another credit-rating firm, wrote Tuesday in a report. Loans and commitments to the retail industry represent about 58% of banks' total equity base, on average, according to the report.

The third quarter saw defaults from big consumer companies J. Crew Group Inc., True Religion Apparel Inc. and Toys "R" Us Inc., according to S&P.

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For banks, an added threat is that the terms of loans to retailers have grown increasingly loose over the past decade, reducing the protections that lenders typically might invoke to get their money back, according to Moody's.

The disturbing trend "puts lenders at much greater risk if borrowers come under stress," Moody's analysts wrote.

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Editors' pick: Originally published Nov. 3.