Concerns over exposure to private credit markets have resurfaced during European bank earnings season, as lenders move to reassure investors about potential spillover risks. Several major banks, including Barclays, UBS and Deutsche Bank, have sought to downplay their exposure, even as recent credit events highlight vulnerabilities in parts of the sector.
Barclays disclosed £15 billion of exposure to private credit as part of a broader structured financing portfolio, alongside a £228 million charge linked to a fraud-related collapse in its securitized products business. Santander, meanwhile, said its exposure to private credit remains immaterial, representing less than 1% of total exposures, while confirming that recent losses have already been covered. Both banks emphasized strict risk controls and diversified portfolios.
Elsewhere, UBS said its exposure to private credit accounts for around 0.5% of its balance sheet and is well diversified, with no signs of major disruption. Deutsche Bank also said its exposure has not resulted in losses and is supported by strong underwriting standards. Despite these reassurances, investors continue to question the opacity of risk distribution across banks and insurers.
Market concerns have been amplified by recent credit stress events in both Europe and the U.S., including failures in niche lending vehicles and structured finance exposures. While higher-yield investors appear relatively calm, investment-grade investors remain cautious, citing uncertainty around indirect exposure and rising volatility in specific sectors such as software and chemicals.
