Banking Industry Faces a Challenging Year: IRA Bank Book Q1 2026

March 2, 2026 | Whalen Global Advisors (“WGA”) has released the The IRA Bank Book Q1 2026, a quarterly review of the US banking industry that focuses on operating and credit trends. The more than 30-page report is available to Premium Service subscribers and reviews the results for the industry in 2025 and sets expectations for the year ahead.

Source: FDIC/WGA LLC

The year 2025 was extraordinary period for many reasons, including low credit loss rates and soaring asset values. QE teaches us that high asset prices suppress the cost of credit, until asset values fall. UBS believes defaults in private credit could reach 15%, 3x the peak delinquency rates for bank loans in 2008.

The report details the rising exposure of US banks to non-depository financial institutions, including credit managers and private equity sponsors. The report includes a proprietary estimate for the continent credit exposure of US banks to NDFIs, as shown in the chart below.

Source: FDIC/WGA LLC

In the 1920s, many observers believed that asset values had reached a ‘permanently high plateau. Sectors like private equity and credit, and AI, all promise higher credit costs ahead. When credit costs rise, earnings decline and stocks follow. The sharp declines in bank stocks in January and February illustrate this tendency.

The fastest growing bank asset category remains loans to non-depository financial institutions (NDFIs), up 7% in Q4 vs Q3 and up 35% YOY to $1.4 trillion at year-end 2025. With growing signs of credit stress among nonbank lenders, banks will eventually pull back from NDFIs. The latest default involving UK mortgage issuer Market Financial Solutions threatens a £930 million shortfall in collateral backing loans to Apollo (APO), TPG Inc. (TPG), other NDFIs.

The IRA Bank Book Q1 2026 is available for purchase in The IRA online store and to subscribers to The IRA Premium Service. Subscribers may login and download the full report below.

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