Jamie Dimon told analysts in April that the $1.8 trillion private credit market poses no systemic risk. "You have to have very large losses in private credit before, at least it looks like, banks are going to get hit," the JPMorgan Chase CEO said. That same week, executives at Citigroup, Bank of America, and Wells Fargo used nearly identical language – describing their own exposures as "comfortable."
But a Reuters analysis of 53 publicly traded business development companies tells a different story. Twenty-eight of them swung into the red during the first quarter of 2026. That is more than double the 12 that were loss-making a year earlier. Average profit collapsed from positive $26 million to negative $7.6 million. The shift was driven by loan markdowns and rising borrowing costs.
BDCs are essentially publicly traded private credit funds. They lend to mid-sized companies that cannot easily get bank loans, then pass most income back to shareholders as dividends. The analysis, done with S&P Global Market Intelligence, used standardized financials that capture debt expenses and changes in loan valuations – items managers sometimes obscure behind adjusted metrics. A BDC may report steady net investment income while the loans on its books steadily lose value.
A growing portion of that reported income is not cash. Payment-in-kind, or PIK, allows borrowers to add interest to their debt balances rather than pay it in cash. In 2025, PIK accounted for 8.1% of BDC interest and dividend income – roughly double its share before 2020. That does not prove imminent losses, but it weakens the comfort provided by headline income figures. A borrower paying in kind is one that cannot pay in cash.
The visible losses may be only the first layer. Off-balance-sheet structures and joint ventures sit between stressed borrowers and the banks. At the 14 BDCs with complete joint-venture disclosures, leverage appears higher than on-balance-sheet numbers show. If those structures unwind, losses could flow back onto the balance sheets of the very banks insisting the danger is contained.
The next test will come when more BDCs report second-quarter results. If markdowns accelerate or PIK income rises further, the gap between Wall Street's public comfort and its private exposure will only widen.
Wall Street’s $128B private-credit exposure shows rising losses
Wall Street's $128 billion private credit exposure is showing signs of stress, with many business development companies reporting losses due to loan markdowns and rising borrowing costs. Despite major banks claiming the risks are contained, the losses could pose broader financial pressure.