Private credit fears loom large over Europe’s banks this earnings season

Banking executives in Europe have moved to calm investor concerns over private credit risks, as lenders' exposure to the troubled sector re-emerged during earnings season. Barclays revealed a £15 billion ($20.3 billion) exposure to private credit in its first quarter earnings statement on Tuesday. This formed part of an overall structured financing exposure to non-bank financial intermediaries, totaling £66 billion, which also included an additional £1 billion tied to business development companies, a focus of recent stress in the U.S. The U.K. lender said it took a £228 million credit-related hit during the quarter after the collapse of specialist mortgage provider Market Financial Solutions (MFS) in February. C.S. Venkatakrishnan, Barclays' CEO, said the single-name charge, which related to a "well-publicized, sophisticated fraud", was in its securitized products business. The U.K.'s Financial Conduct Authority opened an investigation into MSF in March. Its collapse was viewed as a potential "cockroach" pointing to wider issues in the space. Barclays said its broader private credit activity is focused mainly on senior corporate lending, predominantly in closed-end funds involving large established managers, with strict limits on borrower and sector concentrations. …