Citi CEO doesn't see systemic risk lurking in private credit — unless these 3 things converge

• Jane Fraser said on Tuesday she was "sanguine" about risks in private credit.
• She said a convergence of private credit jitters, AI worry, and war in Iran could be problematic.
• When it comes to the war, Fraser said "duration" and "containability" are key factors.

Citi CEO Jane Fraser said she's "sanguine" on the risks in private credit — at least for now.

"There'll be some idiosyncratic risk in there from folks who don't have good credit standards, but I don't think it's a systemic issue," Fraser said on Tuesday at RBC's Global Financial Institutions Conference. "Where it gets a little more concerning would be if the Middle East crisis goes on for a long time, and you see a convergence of the concerns on AI valuations."

She said throughout the conversation that it's hard to predict what will happen in the world and markets in the near future.

If the three potential crises — geopolitical tension, private credit cracks, and AI disruption — converge, Fraser said, "that would be more problematic."

Concerns over the private credit industry have intensified in recent weeks amid redemption requests from high-profile funds. Last week, Blackstone and BlackRock capped withdrawals from their nontraded private-credit funds.

Investors are particularly wary about some funds' exposure to software companies, given the potential for AI to disrupt the sector, though top players in the private credit industry have defended their portfolios. Some critics have compared the current environment to the pre-2008 period and warned that the moves could signal a broader market crisis.

When it comes to how the conflict in Iran is impacting the economy, Fraser said the big questions are "the duration and the containability." If oil prices were to stay above $100 per barrel for a sustained period, that could impact inflation, she said. Oil prices surged above $100 a barrel on Sunday evening, but fell sharply on Monday after President Donald Trump suggested the war could end soon. Prices remained volatile on Tuesday.

Fraser also pointed to ongoing questions about AI valuations and how the technology will disrupt industries. Citi, like many banks, is investing heavily in technology to transform its operations, leading some to question whether head count will shrink. The CEO said on Tuesday that Citi continues to invest in the technology, especially amid the slate of new models.