Key Takeaways
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- US banks are strongly outperforming private-credit giants as deregulation revives traditional lending power.
- Regulatory rollbacks have enabled banks to expand balance sheets and reclaim leveraged lending share.
- Private credit faces mounting pressure from defaults, valuation scrutiny, and slower deal exits.
- Investors are rotating toward banks as earnings momentum and confidence return to the sector.
What Happened?
After more than a decade of losing ground to private-credit firms, large US banks are regaining momentum. Easing regulatory constraints under the Trump administration — including rollbacks to capital rules, stress tests, and leverage limits — have allowed banks to expand lending aggressively. As a result, major banks have ramped up participation in large leveraged buyouts and corporate financings, narrowing the gap with alternative asset managers that once dominated private credit. Equity markets have reflected this shift, with bank stocks sharply outperforming private-credit peers in 2025.
Why It Matters?
The balance of power in corporate lending is shifting. For years, strict post-2008 regulation pushed risk-taking into private credit, allowing asset managers to charge higher rates and grow rapidly. As those regulatory constraints loosen, banks are reclaiming profitable lending opportunities at scale, benefiting from lower funding costs and deeper balance sheets. At the same time, private-credit firms face rising defaults, valuation scrutiny, and pressure from prolonged high interest rates, which have slowed exits and fundraising. For investors, this marks a structural rotation favoring regulated banks over alternative lenders.
What’s Next?
The durability of banks’ resurgence will depend on whether deregulation persists and credit losses remain contained. Investors should watch default trends in private credit, regulatory signals around asset-manager oversight, and banks’ ability to sustain loan growth without eroding underwriting standards. Continued stress in private credit could further accelerate capital flows back toward banks, while any economic downturn would test whether this renewed confidence is cyclical or structural.
