Private credit keeps being named as the market’s next blow-up. On the Switzer Show, arcpoint OCIO’s Jacqui Fernley says there are numbers hiding in recent bank results that show the fear might be overhyped.
Private credit is lending to companies by non-bank funds rather than by banks. The Financial Stability Board, which coordinates financial regulation across the G20, puts the global market at between US$1.5 trillion and US$2 trillion as at the end of 2024, with the United States the largest market. The Reserve Bank’s March 2026 Financial Stability Review reported private credit accounts for less than 2 per cent of financial system assets. The market’s rapidly growing base have led some to label it as a candidate for the next financial accident.
But Jacqui Fernley says we shouldn’t be too hasty with the doom and gloom.
Fernley’s private credit canary in the coal mine
“Normally we would watch the first week of reporting season for the major banks, and normally we look at them as a canary in the coal mine for the economy,” she said.
The number she watches inside those results is bad debts. “The most important thing that we watch is: where are the charge-offs? Where are the delinquencies? So, for everybody, that is really bad debts,” she said. “On a quarter by quarter or year on year, charge-offs are lower. That fundamentally is a very positive thing. That is saying to anyone who wants to look that the economy remains strong. And for everyone with this private credit story in their heads, if private credit was that problematic, you’d see it in the bank results as well. And you’re not.”
A “charge-off” is when a bank has a delinquency on its books that it writes off, usually because it’s unable to collect on the debt. It’s a stat that is actually tracked across the whole US banking sector. According to the US Federal Deposit Insurance Corporation’s Quarterly Banking Profile, puts the net charge-off rate at 0.59 per cent in the first quarter of 2026. That’s actually down 4 basis points on the previous quarter and about 8 basis points across the year.
The June-quarter results from individual banks tell the same story, with Bank of America reporting a net charge-off ratio of 0.47 per cent, down 8 basis points from 0.55 per cent a year earlier.
Fernley added that while charge-offs were lower, recent profit numbers are trending higher too. She pointed to Goldman Sachs results, citing consensus expectations “of $14.50, thereabouts” against a result “hitting 21, give or take.” Goldman reported diluted earnings per share of US$20.98 for the second quarter on 14 July, on net revenues of US$20.34 billion and a return on equity of 23.5 per cent. Her point was the size of the gap rather than the figure itself: “the point of all that is not the numbers, it’s just the scale of the surprise.” She put it down to trading desks and IPO activity.
Ultimately, Fernley does not dismiss the risk posed by runaway private credit lending, but does believe that it’s being overhyped: “I think there are pockets that it is real. But, you know, if it bleeds, it leads. There’s always this hyperbole around the whole sector that I think is driven by people talking about it that don’t understand it. So there’s no doubt there’s some problem, but not really.”
