Private credit fears loom large over Europe’s banks this earnings season
Concerns over private credit markets are affecting European banks during the current earnings season, particularly in the semi-liquid BDC sector where liquidity issues have prompted some firms to restrict redemptions. UBS and Deutsche Bank have both downplayed risks, citing diversified exposure, strong underwriting, and minimal balance sheet impact. While scrutiny increases over lending to sectors like software due to AI disruption, major banks report no significant losses or dislocations in their private credit portfolios.
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Anxieties have since spread to U.S. business development companies — investment vehicles managed by private credit firms — amid growing scrutiny over lending to the software sector, which faces disruption from agentic AI.UBS CEO Sergio Ermotti acknowledged the ongoing stress within private credit this year, particularly in the so-called "semi-liquid" BDC space, where several asset managers have restricted investor redemptions."It's more of a liquidity kind of issue, than necessarily a clear underlying performance issue," Ermotti told CNBC's Carolin Roth in an interview on Wednesday.But UBS, which reported its first-quarter earnings on Wednesday, does "not see any major dislocation or issues" arising from its own private credit investments, according to Ermotti.The Swiss banking and asset…
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