(Bloomberg) — UBS Group AG Chief Financial Officer Todd Tuckner said that recent developments have cooled excitement among the lender’s wealthy clients about private credit, adding to the challenges facing the asset class.
“Interest in private credit among our wealthy clients has been more measured in the current environment,” Tuckner said on an analyst call Wednesday. That’s “clearly reflecting macro uncertainty and a preference for liquidity and capital preservation.”
The comments highlight some of the growing pains facing the $1.8 trillion private credit industry after years of rapid expansion. In recent months, fears that artificial intelligence looks set to disrupt the private equity-backed software businesses that borrow heavily from direct lenders has led investors to step up redemption requests at some of the largest non-traded private credit investment vehicles.
Read More: Direct Lending Fundraising Hits Three-Year Low in First Quarter
Tuckner also said that private credit remains a “very modest portion” of the bank’s balance sheet, with private credit funds accounting for around 50 to 60 basis points of its total leverage exposure.
There have been increasing questions about the exposure of banks to the asset class. Deutsche Bank AG in March flagged a €26 billion ($30.4 billion) exposure to private credit.
CFO Raja Akram said in a Bloomberg TV interview on Wednesday that private credit continues to be a “non-story” for the lender. On a call afterwards he added that the firm continues “to tighten our underwriting standards in the current environment, being super selective about who we lend money to.”
He said that the bank has €2.5 billion in total exposure to business development companies, or BDCs, which includes €2 billion in undrawn credit lines. Most of that exposure is senior in nature, he said.
Read More: Deutsche Bank Flags $30 Billion Exposure to Private Credit
Banco Santander SA Chief Executive Officer Hector Grisi said private credit accounts for less than 1% of total credit. He added that the lender, which also reported first-quarter earnings on Wednesday, has tightened some controls.
