Deutsche Bank Discloses $30 Billion Private Credit Exposure, Stock Falls Over 6%

Deutsche Bank has disclosed that its private credit asset exposure reaches €26 billion, approximately $30 billion. Based on this $30 billion exposure, Deutsche Bank is one of the larger lenders in this asset class. Currently, this market is facing redemption pressures, scrutiny of underwriting standards, and impacts from artificial intelligence on some borrowers such as software companies.

According to the annual report released by Deutsche Bank on Thursday, its private credit loan portfolio increased to €25.9 billion at amortized cost last year, up from €24.5 billion in 2024.

Deutsche Bank stated that it does not have a “material risk exposure” to non-bank financial institutions, but due to connections between its investment portfolio and counterparties, it may still face indirect risks. Its private credit exposure accounts for about 5% of its total loans. While the bank classifies this asset class as a “key risk,” the report did not mention any losses or provisions related to private credit.

Deutsche Bank indicated that approximately 73% of its exposure is in “multi-asset loan facilities (ABS),” collateralized by highly diversified mid-market loans in the US and EU, with broad industry distribution, a loan-to-value ratio of about 65%, and nearly all rated investment grade. The remaining portion is spread across net asset value (NAV) financing, single-asset financing, non-bank commercial real estate loans, Business Development Companies (BDCs), and subscription finance.

The annual report also shows that Deutsche Bank’s loan exposure to the technology sector (including software) reached €15.8 billion at amortized cost, up from €11.7 billion previously. Sources familiar with the matter said last month that Deutsche Bank was part of a loan syndicate of about $1.2 billion to support an acquisition of a software company, which is currently unsellable, resulting in a rare “hung deal.”

Deutsche Bank stated in the report: “The collapse of a few subordinate lenders in the US has heightened investor concern over private credit risks and sparked broader worries about underwriting standards and fraud risks.”

Despite warning about private credit risks, Deutsche Bank’s asset management division, DWS Group, plans to expand its private credit business. The bank said it will broaden product distribution through selective regional expansion and collaboration with private banks to develop innovative products and digital investment solutions.

Deutsche Bank also disclosed a potential litigation risk of up to $1 billion on the same day.

Following these developments, Deutsche Bank’s stock fell 6.1% in Frankfurt trading, likely marking its largest single-day decline since April last year.

Currently, the approximately $1.8 trillion private credit market is experiencing a wave of investor withdrawals. Previously, defaults or bankruptcies of some well-known companies have raised concerns about loan quality and exposure to software companies, especially as the software industry’s business models are under threat from rapid AI development.

JPMorgan has also begun restricting loans to certain private credit funds, as some loans in its portfolio have been downgraded.

The most recent credit event shaking banks and private lenders was the collapse of UK mortgage lender Market Financial Solutions Ltd., which is now facing fraud charges. Last year, failures of US auto parts supplier First Brands Group LLC and subprime auto lender Tricolor Holdings LLC also triggered similar allegations.

According to Moody’s data from October last year, as of June 30, US banks had approximately $300 billion in loans to private credit institutions, with Wells Fargo leading at about $60 billion.

A December report by UBS showed that among European banks, Deutsche Bank has the largest exposure to non-bank financial institutions (NBFIs). About 30% of its loans, advances, and debt securities are related to investment firms, funds, insurance companies, pension funds, and clearinghouses, compared to an average of only 8% for large European banks.

UBS analysts at the time noted that their definition of NBFI was broad, with many assets expected to be well-collateralized and low-risk, so not all “other financial companies” exposures should be considered equally risky.

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