(Bloomberg) - Wells Fargo & Co. said its exposure to private-credit firms was roughly $36.2 billion in the first quarter, offering details on a category closely watched by investors.
Companies in the business services, software and health-care industries make up about half of the total value of the collateral, with software companies accounting for 17%.
For more than 98% of those transactions, Wells Fargo can adjust the margin if the credit performance of the underlying assets worsens. The securitized loans would have a roughly 40% cushion, meaning the funds the bank lends to would absorb about 40% of losses before they are recognized by Wells Fargo, according to an investor presentation Tuesday.
Roughly $8 billion of those loans were made to business-development companies as the equity counterparty — mostly private BDCs, Wells Fargo said.
They’re part of the portfolio showing Wells Fargo’s lending to financial firms other than banks, which totaled $210.2 billion as of March 31. These loans include both securitized loans backed by pools of assets and loans originated through its own underwriting on a loan-by-loan basis.
Among those financial firms, Wells Fargo has loaned the most to asset managers and funds. That includes subscription lines to private equity firms typically backed by their limited partners’ commitments. This segment grew the fastest in 2025, rising 42%, with only $1 million of non-accrual, or potentially bad loans, recorded, according to an earlier annual filing.
Wells Fargo also lends to other financial firms in the consumer and real estate industries. Among all of the company’s non-bank borrowers, non-accrual loans rose to $245 million last year from $24 million in 2024.
The way Wells Fargo characterizes such loans is different from regulatory reporting. Starting about a year ago, regulators required banks to report their loans to non-depository financial institutions. The broad and nebulous bucket contains the closest proxy for investors to gauge banks’ interconnectivity with private credit, which are NDFI loans to so-called business-credit intermediaries.
Wells Fargo in particular has been under the spotlight. At the end of last year, it held $71 billion of those loans, more than the next two biggest among such lenders — Bank of America Corp. and Citigroup Inc. — combined, according to a recent wave of filings with regulators. In its presentation Tuesday, Wells Fargo said $36.4 billion of the total reflected private-credit exposure, with the rest in areas such as equipment financing and accounts-receivable lending.
The latest disclosure followed mounting concerns on private credit in recent months, as funds and business-development companies make headlines as investors try to cash out. Their underwriting standards also came under scrutiny amid a series of fraud cases, and overall asset quality — particularly for loans to software companies — was questioned amid the rise of artificial intelligence.
Wells Fargo was a lender to busted UK firm Market Financial Solutions Ltd., according to people familiar with the matter, and also provided syndicated loans to Goeasy Ltd., a Canadian non-prime lender grappling with bad loans.
By Yizhu Wang
April 14, 2023
