(Bloomberg) -- Top executives from Deutsche Bank AG, UBS Group AG and Societe Generale SA touted the quality of their exposures to private credit as the industry faces concerns over underwriting standards and the impact of artificial intelligence.
At SocGen, the level of repricing of collateral is "non-significant" while "problem credit across thousands of names is marginal," Chief Executive Officer Slawomir Krupa said Tuesday at a conference hosted by Morgan Stanley. His peer at Deutsche Bank, Christian Sewing, said at the same event that the German lender hasn't lost any money on private credit exposures.
UBS is not seeing systemic stress in private credit yet, Chief Financial Officer Todd Tuckner subsequently said. The Swiss lender is comfortable with its level of exposure to the asset class, he said.
The $1.8 trillion private credit market is witnessing an exodus of investors after some high-profile corporate blowups led to mounting concerns over loan quality and exposure to software firms, whose business models are being threatened by the rise of AI. Individual banks are also pulling back, with JPMorgan Chase & Co. restricting some lending to private credit funds after marking down the value of certain loans in their portfolios
"In more than 10 years, we haven't lost one cent in private credit," Sewing said at a conference hosted by Morgan Stanley in London on Tuesday. "I don't believe, by the way, that the noise on private credit will go away short-term. The real differentiation is who is underwriting and what are your underwriting criteria?"
While there may be bumps in the wider private credit industry, the executives said they don't consider the asset class to pose a systemic risk.
"There's going to be a process of cleaning up the market," said Krupa, who also cited long-standing relationships with some players in the industry. SocGen hasn't been affected by high profile cases covered widely in the media in recent months, he said.
Latecomers to the industry in recent years started to do things that were "less sensible," Krupa said at the Morgan Stanley conference. "To some extent, the market reacts reasonably quickly to these excesses and is, I think, sorting it out."
Across asset classes, SocGen has €20 billion ($23 billion) of exposure to the wider business of dealing with financial sponsors, including securitization, according to Krupa. Private credit is "a significant portion of that," he said, adding that the portfolio "is very strong."
Deutsche Bank AG flagged last week that it has €26 billion in exposure to private credit.
(Adds UBS comments in third paragraph.)
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