Private Credit Reshapes Banking as Market Tops $1.7 Trillion | S&P Global Outlook

What's New

S&P Global Market Intelligence's 2026 Private Markets Outlook reveals that private credit firms have fundamentally altered the banking landscape, growing to exceed $1.7 trillion globally while simultaneously taking market share from traditional lenders and supporting commercial real estate valuations through direct lending and loan purchases at better-than-expected prices.

Why It Matters

The rapid expansion of private credit creates a complex dynamic for traditional banks: they face stiff competition yet increasingly partner with these alternative lenders through joint ventures, referral models, and direct lending relationships. Major institutions including JPMorgan Chase, Citigroup, Wells Fargo, Fifth Third Bancorp, and Webster Financial have all established private credit partnerships, signaling an industry-wide acknowledgment that collaboration may be more valuable than pure competition.

Big Picture Drivers

• Regulation: Heightened post-financial crisis rules on traditional lenders pushed capital toward alternative credit providers with greater flexibility

• Yield seeking: More than a decade of low interest rates drove institutional investors away from traditional fixed-income products toward higher-yielding alternatives

• PE integration: Nine of the top 20 global private credit firms are major private equity managers, including Apollo, Blackstone, Ares, Carlyle, and KKR

• Risk transfer: Banks benefit from lower risk weightings on NDFI loans related to CRE—potentially 50% lower than direct CRE exposure

• Regulatory scrutiny: Intense oversight of bank CRE concentrations in 2023-2024 accelerated the shift toward private credit partnerships

By The Numbers

• $1.7T+: Global private credit market size

• $160B+: Dry powder in direct lending-focused funds as of late September 2025

• 57%: Growth in bank loans to private equity firms through H1 2025

• $936B: CRE loans estimated to mature in 2026, up 18% from 2025

• 375: Banks with elevated CRE concentration, down from 567 two years prior

Key Trends to Watch

• Credit stress signals: JPMorgan CEO Jamie Dimon warned of potential excess in the system, stating that isolated credit issues may indicate broader problems ahead

• CRE stabilization: Bank CRE delinquencies declined for the first time in 10 quarters, falling to 1.52% in Q2 2025 from 1.59% in Q1

• Maturity wall extension: Loan modifications and extensions have pushed the CRE maturity wave further out, with 2029-2030 estimates rising significantly while 2025 maturities declined

• REIT valuation recovery: Median discount to NAV across US-listed REITs improved to approximately 15% in late September from nearly 30% at year-end 2023

The Wrap

While private credit's explosive growth has pushed risk outside the traditional banking system and supported asset valuations, industry leaders warn the sector remains untested through a significant downturn. As JPMorgan's Douglas Petno noted, leading players are well-positioned, but secondary and tertiary lenders face uncertain outcomes when economic conditions deteriorate—creating potential spillover risks for banks despite reduced direct exposure.

Read Full Report: S&P Global 2026 Banks Private Markets Outlook