Deutsche Bank and Barclays are among the European banks most exposed to a potential private credit downturn, according to new analysis that is raising fresh concerns about lending conditions as businesses already face higher borrowing costs.
New analysis from Bloomberg Intelligence found that four banks — Deutsche Bank, Barclays, BNP Paribas and HSBC — account for almost two-thirds of the €137 billion in exposure tied to the sector across major UK and European lenders. While analysts do not see an immediate threat to the wider banking system, the findings highlight how concentrated some risks have become after years of rapid expansion.
The market grew rapidly during years of cheap money, giving companies an alternative source of financing outside traditional banking channels. Investors poured capital into the asset class in search of stronger returns, while businesses increasingly relied on non-bank lenders to fund acquisitions, expansion plans and day-to-day growth.
That model becomes more vulnerable when growth slows, borrowing costs remain elevated and more companies struggle to meet repayment obligations. Under a scenario modelled by Bloomberg Intelligence, losses across the banks surveyed could reach around €7 billion if exposures suffered a 5% loss rate. While manageable at a sector-wide level, the impact would fall unevenly. Deutsche Bank faces the largest potential hit under the model, followed by Barclays.
For investors, the bigger issue is what those losses could signal beyond bank profits. When lenders become more cautious, companies often find it harder or more expensive to secure funding for expansion, hiring and investment. That can gradually affect economic activity well beyond financial markets, particularly when businesses are already facing higher borrowing costs and slower growth.
As the sector has expanded, regulators and investors have paid closer attention to how it might perform during a more challenging economic environment. What was once viewed as a relatively niche area of finance has become a significant source of funding for businesses across parts of Europe and beyond.
Recent setbacks have already offered reminders that not every deal performs as expected. Barclays reported losses linked to failed lenders MFS and Tricolor earlier this year, while HSBC disclosed a profit hit connected to an alleged fraud case. Both institutions described the incidents as isolated rather than evidence of wider weakness.
Executives at several lenders have pushed back against concerns surrounding the market. Deutsche Bank chief executive Christian Sewing said earlier this year that the bank had not lost "one cent" from this area of lending in more than a decade. Analysts note, however, that strong historical performance offers only limited reassurance if economic conditions deteriorate.
Many businesses are already adjusting to a financing environment that looks very different from the one that helped fuel the sector's rise. Borrowing remains more expensive, investors have become more selective and companies face greater scrutiny when seeking capital.
Few analysts are predicting a banking crisis. Yet after years of strong expansion, attention is increasingly shifting from growth opportunities to downside risks. If economic conditions weaken further, lenders, businesses and markets may discover that some risks were easier to overlook during the boom than they are during a slowdown.
