Wall Street’s $128 billion private credit exposure is starting to look harder to contain
Private credit stress is showing up in publicly traded business development companies, which act as listed private credit funds. In a Reuters analysis of 53 BDCs, 28 posted first-quarter 2026 losses, up from 12 a year earlier, and average profit fell to a loss of $7.6 million from a $26 million gain. The weakness was driven by loan markdowns, higher borrowing costs, and more payment-in-kind interest, which signals borrowers are short of cash. Off-balance-sheet leverage through joint ventures also rose sharply. The concern is that banks are deeply involved in funding private credit through credit lines, warehouse financing, and other facilities. JPMorgan, Citi, Bank of America, and Wells Fargo together report over $128 billion of exposure. Despite banks calling their risk manageable, lending activity is slowing, private debt issuance is down, and investor redemptions are rising. The main worry is that losses could move from borrowers to lenders and back onto bank balance sheets if funding tightens.
