Deutsche Bank has disclosed a risk exposure of 26 billion euros ($30 billion) to the private credit sector. This asset class is currently confronting a triple challenge: investor redemptions, scrutiny of underwriting standards, and the impact of artificial intelligence on certain borrowers, such as software producers.

In its annual report released on Thursday, the bank stated that while it is not exposed to "significant risks" directly related to non-bank financial institutions, it may face potential indirect credit risks through linked investment portfolios and counterparties.

The report noted, "The collapse of a few US subprime lenders has heightened investor focus on risks in private credit and sparked broad concerns about underwriting standards and fraud risks."

Following several high-profile corporate failures that intensified worries about loan quality and exposure to software companies, the $1.8 trillion private credit market is experiencing investor withdrawals. The business models of software companies are being impacted by the rapid advancement of artificial intelligence. After writing down the value of some loans within its private credit funds, JPMorgan Chase has tightened lending for certain of its own loans.

Deutsche Bank's annual report shows that its private credit portfolio, measured by loan exposure at amortized cost, increased to 25.9 billion euros, up from 24.5 billion in 2024. Its lending exposure to the technology sector, which includes software, stood at 15.8 billion euros at amortized cost, higher than the previous 11.7 billion euros.