Oliver Wyman – Private Credits Next Act

Private credit is evolving towards asset-based lending to sustain growth and meet changing credit allocation trends. The addressable market for specialty finance in the US alone is estimated to be a $5.5 trillion opportunity, with private credit currently holding less than a 5% share. As a result, private credit players are seeking partnerships with banks, shifting away from being adversaries. While private credit has seen a surge in activity, banks are also regaining footing in the leveraged loan market. Some companies are refinancing their debt from private credit firms to traditional banks, indicating a shift back towards bank lending. This shift from banks to private credit is not a new phenomenon, as bank lending as a share of total borrowing has been declining for 50 years. Despite concerns that the boom in private credit may be losing steam, historical patterns suggest that bank disintermediation is likely to continue. The report delves into what the future of private credit 2.0 might look like for both banks and investors.