M&T Bank takes a slow and steady approach to private credit

Courtesy of M&T Bank

• Key insight: M&T Bank is taking a measured approach to private-credit lending, as the risks of the booming sector haven't yet been tested by an economic downturn.
• Supporting data: Loans to nonbank financial institutions, which includes private credit, make up about 9% of the company's total lending portfolio.
• Expert quote: "It's not about hedging against private credit. … It's about understanding your own portfolio, understanding all the risks that are in your portfolio and in the market, and coming to a view of where you want to be with safety and soundness." — CEO René Jones

M&T Bank is easing steadily into the private-credit sector, CEO René Jones said, though he acknowledged that the ballooning market hasn't yet been tested by a credit cycle.

In an interview with American Banker, Jones said the Northeast regional bank has cautiously increased lending to private-credit firms. He called the booming sector "both a competitor and a partner," pointing to the benefits and costs for banks that work with private-credit firms.

On the plus side, Jones noted, banks shift risk off their balance sheets and free up liquidity by lending to the private-credit sector. But passing borrowers out of the banking system increases competition for wallet share.

The relatively opaque nature of the private-credit sector also poses risks, Jones added.

"Nothing is more important than the integrity of the financial system," he said. "Today, one of the concerns is that we don't have that full transparency, as much as we would like. And so we have to be cautious as we move in that direction."

Jones made a similar point at a recent industry conference, pointing to the interconnectedness of different parts of the financial system.

"I think the big risk that we have today, no matter how you look at it, is there are too many of us looking at the U.S. as if there's more than one financial system," Jones said last week at a banking conference. "There's just one. Everything is interconnected. You can't have a bad day in private equity without having some impact on the banking system."

Banks' loans to nonbank financial institutions have skyrocketed in recent years, fueled by regulations that created a "frenemy" dynamic between traditional lenders and private-credit firms.

Jones, who took the reins at M&T in 2017, told American Banker that competition from outside the banking system isn't new. Surges of new entrants in the market, he said, are often followed by increases in failures. But those cycles also typically result in enduring innovations that strengthen the banking industry, Jones argued.

"When I started my career, you couldn't securitize a middle-market loan," he said. "You couldn't securitize a commercial real estate loan. Now you can. Which is the advent of something that makes us all stronger."

Jones also said that innovations in the financial industry, like the rise of private credit, are often challenged by issues such as lack of transparency, overzealous growth or "someone taking something too far." He added, though, that the shakeouts also make the system more resilient in the long term.

The private-credit sector, which hasn't faced a serious economic downturn since it took off in the U.S., is starting to show some cracks. Morningstar's U.S. Asset Management index is down 20% in 2026. And some of the blows to private credit are bruising traditional banks.

M&T disclosed last month that it may take losses from a legal battle with a group of investors who claim the company's Wilmington Trust subsidiary failed to protect them from the collapse of subprime auto lender Tricolor Holdings. Private-credit firms had helped fuel Tricolor's growth.

The auto lender's bankruptcy, allegedly due to fraud, dealt credit blows to a number of banks with loan exposure to the company. M&T's potential legal exposure comes in connection with Wilmington Trust's role as custodian to several Tricolor-related trusts.

Fitch Ratings said in a report at the end of 2025 that the risks from private credit aren't systemic for the banking sector, but opacity may obscure deterioration of underlying borrowers' performance. Loans to nonbanks, a category that includes private credit, made up 43% of all bank loan growth in the country from January 2025 to January 2026, per Federal Reserve data.

M&T's strategy is to "not be too ambitious" and avoid concentration risk, Jones told American Banker. About 9% of the bank's loans are to nonbank financial institutions, which includes private-credit firms. But that exposure is concentrated in less novel segments, like mortgage warehouse lines and capital call lines.

The Buffalo, N.Y.-based bank recently learned a lesson about the risks of overexposure, which resulted in a yearslong strategy to reel in its commercial real estate portfolio. Banks' commercial real estate loans were under the microscope for much of 2020 to 2024, as the pandemic-induced shift in work and travel patterns put pressure on borrowers' revenue, and the rapid rise of interest rates compressed banks' margins.

At M&T, commercial real estate loans made up nearly 40% of total assets four years ago, far more than the average amongst its peers. The company's stock price fell some 35% from the fall of 2022 to the fall of 2023, as investors spurned the overweight loan book, despite M&T's relatively limited losses within its commercial real estate portfolio.

Now, M&T's loans to the CRE sector — which has inched its way out of the hot seat — make up about 18% of the bank's balance sheet. The total book has decreased by about 30% in the last five years. And M&T's stock is trading some 80% higher than it was at its low point in 2023.

Jones said the $214 billion-asset company manages its risk to shocks that could hit "anywhere" by limiting its exposure to a single sector.

"It's not about hedging against private credit," he said. "It's about understanding your own portfolio, understanding all the risks that are in your portfolio and in the market, and coming to a view of where you want to be with safety and soundness."

More than 70% of the loans held on M&T's balance sheet are to clients within its footprint, which includes 12 states across the Northeast, the Eastern seaboard and Washington, D.C., Jones said.

M&T is the 20th-largest U.S. commercial bank by assets, but it's still less than 6% of the size of JPMorganChase, which tops the list.

Jones said his company doesn't feel pressure to grow for the sake of getting bigger, but its asset size has nearly doubled in his near-decade as CEO. M&T's technology spending has tripled in that time, he said.

Most of those expenditures are focused on performance management systems, especially in the area of risk management, according to Jones.

"One of the big advantages I think we have is that we're large enough to have the resources and all the products and services of a very large bank," Jones said. "But we're small enough so that we're not so complex that we can't actually take the time to reinforce those management systems."