C&I loan growth is surging. Are private credit woes the driver?

• Key insight: The rise in C&I loans during the first quarter is related to recent disruption in the private credit market, one economist argues. 
• What’s at stake: Bank analysts said it’s likely a factor, but probably not the only one. Banks have been building up their C&I businesses, and borrowers are ready to invest.
• Supporting data: C&I loans at banks rose 12.7% quarter over quarter, according to Fed data. For all of 2025, C&I loans increased 4.3% compared to the prior year.

Commercial-and-industrial loan growth was a bright spot for many banks during the first quarter, but the source of the uptick may not be as straightforward as headline numbers would suggest.
The increase in C&I lending, on both a year-over-year and quarter-over-quarter basis, is the result of disruption in the private credit sector, not a reflection of higher demand, one economist argues.

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“That’s really what’s driving bank lending higher,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, told American Banker. “There are no otherwise obvious explanations why lending would be picking up, now, given the macroeconomic backdrop.”

Some bank analysts aren’t so sure. While the private credit sector’s woes may be contributing to the surge in C&I loans, banks have reported strong lending pipelines and borrowers who are ready to invest, they say.

The underlying reasons for the increase may not be clear at this moment, but it’s an area worth watching. Banks have been chasing loan growth for years amid higher-for-longer interest rates. Analysts say the truth about what’s driving that growth is unlikely to be revealed from one stronger-than-expected quarter. 

“A single quarter doesn’t make a year,” said Maureen Levelis, an analyst at Morningstar DBRS.

Regardless of the reasons why, C&I lending, which took a back seat during much of the pandemic, has reemerged as a growth opportunity for banks. Bankers say that customers are finally eager to invest in their businesses after holding off due to higher interest rates, inflation and other macro-economic factors.

During the first quarter, C&I lending at commercial banks jumped 12.7% compared with the last quarter of 2025, according to the Federal Reserve’s weekly H.8 report. For all of 2025, C&I loans grew 4.3% year over year, following 0.9% growth in 2024 and a decline of 0.3% in 2023.

Wells Fargo, which can grow now that it’s no longer operating under an asset cap, said that average C&I loans rose 8.3% during the first quarter from the prior three months.

Pittsburgh-based PNC Financial Services Group reported a quarter-over-quarter increase of 6.4% in average C&I loan balances. Citizens Financial Group in Providence, Rhode Island, said its C&I loan book on average rose 4.2% compared with the prior quarter.

Associated Banc-Corp in Green Bay, Wisconsin, said its C&I loans at the end of the quarter totaled $12.3 billion, up 4.6% quarter over quarter.

The “sharp rise in bank lending to regular businesses this year so far has been striking,” Tombs wrote in a recent report. He believes the pickup “reflects a shift in the composition of business finance,” not higher demand.

Borrowers’ ability to access business loans from the private credit market has become more challenging as investors have pulled their money out of private credit funds, Tombs told American Banker. The private credit sector, which boomed in recent years, has been stressed by AI-related fears and high-profile bankruptcies of private credit borrowers.

The economic data doesn’t suggest that businesses are more upbeat on the economic outlook or more ready to invest, given ongoing uncertainty due to the Iran war, oil prices and inflation, according to Tombs. He believes the uptick in bank C&I loans, therefore, is a result of a mix shift.

“We hear all the time about problems in the private credit market,” Tombs said. “So any small restriction there forces companies to source funding from banks.”

Analysts who cover the banking industry pointed out that banks have offered myriad reasons for the recent increase in C&I lending. A lot of bank executives during first-quarter earnings calls cited higher credit utilization rates and the fruits of banks’ increased investment in C&I hiring, Levelis said.

A shift away from private credit and toward banks “could maybe be a small portion driving this loan demand, but I think it’s just one of many factors,” Levelis told American Banker.

Brian Foran, an analyst at Truist Securities, said that private credit challenges are one of items on the list of factors that explain the upswing in C&I lending at banks. 

It’s unclear whether the private credit sector’s woes will get resolved or result in a bigger problem. Foran noted that there’s relatively little visibility into private credit trends.

What’s ahead for C&I lending, at least in the near term, may be easier to predict. Banks’ C&I outlooks on recent earnings calls were mostly optimistic, Foran noted.

“In a nutshell, the message was that 2Q is probably going to look a lot like 1Q,” he said.