The major European banks have overall low direct exposures to the private credit market, but the rapid growth of the sector and the concentration of loans to software companies could lead to a gradual deterioration of the funds’ portfolios, resulting in additional provisions in the coming quarters. This is what emerges from a report published this week by S&P Global Ratings.
Exposure to 108 billion
According to the agency’s estimates, the seven largest European institutions have an overall exposure to private credit funds of approximately 108 billion euros, equal to approximately 2.0% of their total loans to customers, in line with estimates from the Financial Stability Board which recently indicated approximately 130 billion dollars in aggregate exposures for banks in the euro area and the United Kingdom. Deutsche Bank is the most exposed with 25.9 billion (5.4% of loans), followed by BNP Paribas with 22 billion (2.5%), Barclays with 16 billion pounds (3.6%), Société Générale with 14 billion, HSBC with 16 billion dollars (1.6%), Banco Santander with less than 1% of the portfolio and Crédit Agricole with 2.9 billion (0.2%).
The risks
The main risk factor identified by S&P is the concentration of exposures towards software companies: according to BIS data, private credit loans to SaaS companies grew from around 8 billion dollars in 2015 to over 500 billion at the end of 2025, equal to 19% of the total. With AI-native companies challenging the competitive advantages of traditional software players, “market participants have begun to question the quality of these private credit exposures, resulting in high redemption rates in some funds.” Also weighing on sentiment is the HSBC case, which recorded 400 million dollars of provisions on an exposure linked to the alleged fraud of the British mortgage institution Market Financial Solutions, to which must be added 228 million pounds of provisions by Barclays on the same matter.
The interest for Private Credit is reduced
S&P specified that the exposures are typically secured with moderate loan-to-value (50-60% for portfolio financing) and that “we do not see these exposures to private credit funds as a material source of systemic risk for European banks”. However, “following a period of rapid growth and a deteriorating macro environment, more non-bank lenders may experience worsening credit portfolios.” Any losses in the coming quarters are “manageable, given the relatively small size of the exposures and the expectations of overall solid profitability of the large European banks in 2026”.
