The Web of Private Credit Lenders and Where We See It Heading

This commentary explores the recent rapid growth in private credit, as well as the market structure and linkages across participants and the implications going forward.

Key highlights include the following:
-- Having tripled in size over the past decade, global private debt assets under management exceeds $1.8 trillion, which is now in line with the broadly syndicated loan and high-yield bond markets. Looking forward, we believe the private credit market has plenty of room for further growth.
-- While the rapid growth of an untested through-the-cycle asset class undoubtedly raises concerns, the risks related to private credit borrowers have an appropriate shelter.
-- We expect well-established private credit managers to continue to consolidate market share, particularly given the operating environment.
-- We expect loans to the private credit industry to become a larger portion of bank loan portfolios, with regulators increasing their efforts to improve market transparency.

"Looking forward, we see nondepository financial institution loans becoming a larger portion of loan portfolios across the Big Six U.S. banks, which we view as manageable," said Michael McTamney, Senior Vice President, North American Financial Institution Ratings. "Overall, banks in our coverage universe have diversified loan portfolios and robust balance sheet fundamentals, including substantial amounts of liquidity and capital."