Yet another canary in the ever growing coalmine that is private credit appeared this morning as Deustche Bank's annual report flagged a significant €26 billion ($30 billion) exposure to private credit, an asset class that’s grappling with fund redemptions, scrutiny of underwriting standards and the impact of AI on some borrowers such as software makers.
As the slow-motion train-wreck gathers steam (most recently with Morgan Stanley, Cliffwater, and BlackRock gating investors in their private credit funds), investors are searching various financial entities balance sheets for exposures with the giant German lender itself warning:
"Failures of a select number of sub-prime lenders in the U.S. increased investor focus on risks associated with private credit and raised wider concerns around underwriting standards and fraud risk."
The report showed the private credit portfolio increased to €25.9 billion of loans at amortized cost, from €24.5 billion in 2024. Its loan exposure to the technology sector, including software, accounts for €15.8 billion at amortized cost, up from €11.7 billion.
Bloomberg reports that the lender said it is not exposed to "significant risks" related to non-bank financial institutions, but that it could face potential indirect risks through interconnected portfolios and counterparties. While identifying private credit as a "key risk", the report did not mention any losses or provisions tied to the private credit exposure, which represents about 5% of its loan book.
Bloomberg reports that, according to people familiar with the matter, the German firm is part of a group of lenders who, since last month, have been unable to sell about $1.2 billion of loans backing the acquisition of a software provider in a rare hung deal.
Deutsche Bank shares are down 8% on the day (the biggest drop since Liberation Day , last April) to their lowest since July 2025...
Finally, to really comprehend the scale of this crisis - which, for now, is being forced off the proverbial front-pages of market coverage by the impact of Trump's Iran War - everything you wanted to know but were afraid to ask is here... and remember, we've seen this pattern before...
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