RPT-BREAKINGVIEWS-Goldman Sachs dials up private credit risk-reward

By Stephen Gandel

NEW YORK, April 29 (Reuters Breakingviews) - Risk and reward go hand-in-hand. Yet Goldman Sachs GS.N generated a record $3.7 billion in the first quarter, up 38% year-over-year, for financing activities on which the Wall Street giant says it has never lost a cent. Volatility played a role, but a big driver is the fact that the bank appears to charge its market-centric clients, like private credit firms, a relatively high interest rate. Boss David Solomon has called this lending durable, but a disconnect between risk and rates raises doubts.

Banks’ entanglement with the murky world of private lending is cause for increasing worry. Buyout barons like Blackstone BX.N or Apollo Global Management APO.N have muscled in on old-guard financiers’ turf of backing risky buyouts with debt. In turn, though, they lever up their investments with credit from traditional lenders.

An April report by the Group of Thirty warned of rising borrowing by non-bank financial institutions, a designation that mingles together private lenders, hedge funds, insurers, business development companies, purveyors of buy-now-pay-later plans and the like. The report cautioned that exposure exceeds loss-absorbing capital at "many U.S. and some euro area banks." At the end of last year, Goldman had $118 billion in loans to NBFIs, up from $91 billion at the end of 2024.

How much those specific loans paid out is something of a mystery. Goldman collected $4.1 billion of interest on an average of $215 billion in total lending during the final quarter of 2025, according to a filing with the Federal Deposit Insurance Corporation. Of that, the bank disclosed $1.75 billion in interest from $80 billion in loans tied to real estate, credit cards and traditional corporations. The rest – some $2.25 billion in interest during the quarter – came from Goldman's remaining $135 billion. Annualize the sum and it implies a rate of 6.7%.

Not all of this interest comes from private credit, and it may include short-term loans or those secured by easily seized collateral. But more than 85% of the loans are to NBFIs. The blended rate across these borrowers is hardly subprime, but also doesn’t signal totally risk-free activity. High-yield bonds averaged a 6.5% rate late last year, according to data from Intercontinental Exchange.

It would be hasty to simply conclude that Goldman’s loans are somehow 0.2 percentage points riskier than junk bonds. Borrowers might be willing to pay more for the bank’s preeminent reputation or better service. Indeed, one private equity executive told Breakingviews that his firm borrows from Goldman despite higher rates because of perceived better execution.

Asked for comment, a Goldman Sachs spokesperson told Breakingviews that “we strongly disagree with the inaccurate assumptions and fuzzy math in this piece.”

Nonetheless, rates tend to follow risk. Goldman's CFO Denis Coleman recently told analysts that concerns about private credit have been overblown, and that the firm’s historical loss rate on these clients is zero. Thanks to strict collateral requirements and other underwriting standards, he added that he is confident the bank will keep it that way. One durable rule of finance, though, is that these outcomes are never entirely in Wall Street’s hands.

Follow Stephen Gandel on LinkedIn and X.

CONTEXT NEWS

Goldman Sachs' first-quarter results, which the bank reported on April 13, included $3.7 billion in net revenue from financing in its markets business, a record high.