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MarketsAI Desk•3 views

Wall Street Banks Regain LBO Market Share as Private Credit Stumbles

Wall Street banks are recovering market share in leveraged buyout financings above $1 billion from private credit lenders. After a decline to 39% in 2023, banks' share rose to over 50% in 2025. This rebound is fueled by lower interest rates, easing bank regulations, and difficulties in the private credit sector from past aggressive lending. Private credit faces rising default risks and investor pressure for liquidity. Regulatory shifts, such as potential changes to Basel III Endgame, could further advantage banks. Experts describe an ongoing tug of war, with banks seizing opportunities to compete.

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Wall Street Banks Regain LBO Market Share as Private Credit Stumbles

Wall Street banks are clawing back market share in large leveraged buyout financings from private credit lenders, driven by regulatory easing and sector challenges.

Market Share Shift

According to PitchBook data, banks' share of buyout financings above $1 billion fell to 39% in 2023 from about 80% in the five years prior to 2023. This share has since recovered to just over 50% in 2025.

Key Drivers

  • Declining interest rates: Lower borrowing costs enhance bank competitiveness.
  • Easing regulations: Potential weakening of the Basel III Endgame framework may reduce capital requirements for banks.
  • Private credit struggles: Years of aggressive lending have increased default risks and investor liquidity demands.
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Private Credit Challenges

  • Heavily indebted borrowers face repayment difficulties as interest rates rise.
  • Investor demand for liquidity is growing, with some clients seeking to withdraw capital after long lock-up periods.
  • Moody's chief economist Mark Zandi expects more credit problems due to geopolitical tensions, higher borrowing costs, and sector-specific pressures.

Regulatory Tailwinds

  • Anticipated deregulation under the Trump administration could weaken Basel III Endgame, aiming to redirect business lending to banks.
  • Recent Federal Reserve proposals to adjust regulatory capital frameworks may position banks for greater lending competitiveness.

Expert Opinions

  • Mark Zandi of Moody's: "This is an opportune time for banks to regain market share from private credit funds."
  • Shannon Saccocia of Neuberger Berman: Regulatory changes could raise competition for private credit lenders.
  • Jeffrey Hooke of Johns Hopkins Carey Business School: "The tug of war is just starting. The rules have been relaxed, so it's only natural that banks want to get back some of their market share."

Recent Deals

  • Banks have demonstrated appetite for large transactions, including multi-billion-dollar leveraged loan financings for Electronic Arts and Sealed Air.
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