Deutsche Bank's Private Credit Exposure Draws Investor Scrutiny

Deutsche Bank shares fall 27% amid concerns over its large private credit holdings, despite record 2025 profits and CEO assurances on portfolio safety.

Investor confidence in Deutsche Bank has been shaken following the disclosure of its substantial private credit holdings in its annual report. The bank's shares have declined by approximately 27% since the start of the year, a drop that coincides with market concerns over its €26 billion engagement in a sector facing pressure.

A European Leader in Private Debt

Deutsche Bank has built Europe's most significant private credit portfolio, which expanded to €25.9 billion by the end of 2025. This represents a 6% increase over the previous year. A striking feature of the bank's lending and securities is that roughly 30% are linked to investment firms and funds. This concentration is notably higher than the European industry average, which stands at just 8%.

Chief Executive Christian Sewing has pushed back against the growing concern. He characterized private credit as a "loud" topic but not a systemic issue, emphasizing that the bank has "not lost a single cent" in this segment. The structure of the portfolio provides some context for his confidence: about 73% of the positions are in asset-backed securities. These feature conservative loan-to-value ratios around 65% and predominantly carry investment-grade ratings. This approach is designed to achieve broad diversification across mid-sized corporate loans in both the United States and the European Union.

Record Profits Meet a Cautious Near-Term Outlook

Operationally, the bank remains on solid footing. It posted a net profit of €7.1 billion for 2025, marking the strongest annual result in its history. For the first time, its return on equity reached 10.3%, hitting the institution's long-term target. The bank has also confirmed its intention to raise its payout ratio to 60% starting in 2026.

However, Sewing anticipates flat revenues for the current first quarter. He noted that the investment bank's trading business is likely to perform "somewhat weaker," partly due to unfavorable currency movements. Despite this near-term caution, Deutsche Bank reaffirmed its full-year targets, which include group revenues of approximately €33 billion.

A fresh perspective is expected from new Chief Financial Officer Raja Akram, who assumed his role on March 15. Akram joins from Morgan Stanley, where he served as deputy CFO, and is tasked with instilling greater Wall Street discipline into capital management. This move is aligned with the bank's goal of achieving a return on tangible equity (RoTE) of over 13% by 2028.

All eyes are now on the quarterly results scheduled for release on April 29. Investors are poised to conduct a detailed examination of the credit metrics within the private credit portfolio, along with management's forecasts for potential losses. This report will serve as the first concrete stress test for Sewing's recent assurances regarding the bank's exposure.