Key Takeaways
- • Private credit fundraising for North American lending slowed to $13 billion in Q2 2025, the smallest quarterly raise in five years, according to S&P Capital IQ and Preqin data, while North America-oriented private debt dry powder stood at $280.8 billion as of October.
- • Banks are re-entering lending: C&I loan books are growing, US regulators have reversed course on stricter bank capital rules, and tight corporate bond spreads are drawing borrowers back to public debt markets.
- • At stake for banks is at least $70 billion in annualized corporate lending revenue plus the refinancing opportunity on $3.2 trillion of corporate debt maturing within two years, per PwC.
- • Lending to nonbank financial institutions, including private credit funds, offers banks lower risk-weighted capital requirements and sponsor-relationship access, with non-GSIB banks rising to roughly 30% of this lending by Q2 2025 from about 20% historically.
- • PwC recommends a hybrid strategy combining direct lending in areas of competitive advantage, partnerships with private credit firms, and financing to private credit funds and BDCs, supported by investment in digital capabilities and AI.
Summary
Private credit's share of lending was accelerated beginning in 2022, when inflation and banking-sector turmoil led banks to pull back. PwC argues that the question now is whether the sector's growth will continue as banks regain ground, and it expects a new equilibrium in which banks and private credit coexist, rather than private credit displacing bank lenders altogether.
Private credit faces a squeeze from two directions: private capital supply is rising while demand for traditional credit is rebounding, and macroeconomic uncertainty, including tariffs and tax policy, is restraining corporate borrowing. According to S&P Capital IQ and Preqin data, only $13 billion of private debt was raised for North American strategies in the second quarter of 2025, the smallest quarterly total in five years. Year-to-date fundraising of $47.7 billion through the first two quarters was the weakest start since 2019, when $30.3 billion was collected. PwC notes that these declines do not necessarily signal waning investor appetite, as managers may be prioritizing deployment and growth may be occurring in vehicles not classified as private debt funds. Dry powder nonetheless remains elevated at $280.8 billion as of October.
Bank lending is recovering. Commercial and industrial lending, the category most affected by private credit's growth, contracted in late 2023 and early 2024, but banks are now accelerating C&I growth. Corporate bond issuance, including investment-grade, high-yield and convertible bonds, is surging in 2025 after a strong 2024 as spreads tighten.
Many banks are pursuing a hybrid model that includes lending to private credit funds and other nonbank financial institutions. Such loans are often senior in the capital structure and carry lower risk weights than direct corporate lending, improving return on capital, and they provide operating efficiencies and access to the private equity sponsor community. GSIBs historically accounted for nearly 80% of lending to nonbank financial institutions, but that share fell to about 70% by Q2 2025 as large regional banks entered the market.
PwC characterizes banks' strategic choices as a mix of direct competition, partnerships, and financing or services for private credit providers. Private credit is expected to retain a role in bespoke, premium and illiquid lending, while banks can focus on standardized, lower-cost credit. PwC says the central issue for banks is strategic, not existential, and that the stakes include $70 billion in annual corporate lending revenue and $3.2 trillion of maturing corporate debt. Success will depend on digital capabilities, data management, AI adoption and disciplined execution, along with a diversified model that allows banks to scale exposures up or down as conditions change.
Private credit faces a squeeze from two directions: private capital supply is rising while demand for traditional credit is rebounding, and macroeconomic uncertainty, including tariffs and tax policy, is restraining corporate borrowing. According to S&P Capital IQ and Preqin data, only $13 billion of private debt was raised for North American strategies in the second quarter of 2025, the smallest quarterly total in five years. Year-to-date fundraising of $47.7 billion through the first two quarters was the weakest start since 2019, when $30.3 billion was collected. PwC notes that these declines do not necessarily signal waning investor appetite, as managers may be prioritizing deployment and growth may be occurring in vehicles not classified as private debt funds. Dry powder nonetheless remains elevated at $280.8 billion as of October.
Bank lending is recovering. Commercial and industrial lending, the category most affected by private credit's growth, contracted in late 2023 and early 2024, but banks are now accelerating C&I growth. Corporate bond issuance, including investment-grade, high-yield and convertible bonds, is surging in 2025 after a strong 2024 as spreads tighten.
Many banks are pursuing a hybrid model that includes lending to private credit funds and other nonbank financial institutions. Such loans are often senior in the capital structure and carry lower risk weights than direct corporate lending, improving return on capital, and they provide operating efficiencies and access to the private equity sponsor community. GSIBs historically accounted for nearly 80% of lending to nonbank financial institutions, but that share fell to about 70% by Q2 2025 as large regional banks entered the market.
PwC characterizes banks' strategic choices as a mix of direct competition, partnerships, and financing or services for private credit providers. Private credit is expected to retain a role in bespoke, premium and illiquid lending, while banks can focus on standardized, lower-cost credit. PwC says the central issue for banks is strategic, not existential, and that the stakes include $70 billion in annual corporate lending revenue and $3.2 trillion of maturing corporate debt. Success will depend on digital capabilities, data management, AI adoption and disciplined execution, along with a diversified model that allows banks to scale exposures up or down as conditions change.
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