US banks have lent nearly $300bn (£225.2bn) to private credit providers as of June, with overall lending to non-depository financial institutions (NDFIs) reaching $1.2tn.

Banks report their lending to private credit providers within the broader category of NDFIs, with loans to these institutions comprising 10.4 per cent of US banks’ total lending, almost three times the 3.6 per cent share recorded a decade ago, according to analysis by Moody’s Ratings.

Moody’s explained that the shift towards private credit by US banks reflects their adoption of new strategies in response to changing market conditions, with a growing focus on NDFIs and, consequently, private credit. Overall, many banks are entering new partnerships with alternative asset managers to diversify income sources and mitigate risk, the ratings agency explained.

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Breaking down the data, Moody’s reported that the top five lenders in the private credit market include Wells Fargo, which leads the way with $59.7bn (£44.8bn) in lending as of June, followed by Bank of America at $33.2bn (£24.9bn), PNC at $29.5bn (£22.1bn), Citigroup at $25.8bn (£19.4bn), and JPMorgan Chase & Co. at $22.2bn (£16.6bn).

In their analysis, Moody’s highlighted the paradox that banks are simultaneously competing with and providing financing to non-bank lenders. Nevertheless, it cautioned that “asset quality challenges may surface.”

The recent bankruptcy of Tricolor Holdings illustrates how bank lending to NDFIs can lead to significant losses, Moody’s said. However, many in the sector have been quick to point out that in cases such as Tricolor and First Brands, there is a distinction between fraud and credit issues driven by poor performance.

Overall, Moody’s reported that private credit assets under management have tripled over the past decade, a growth rate far outpacing that of most other forms of credit.

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