BDCs: 2Q26 Preview Remain Cautious on BDCs. Establishing Dec-2027 PTs (No Rating Changes). Credit Headwinds & Muted Rotation Fully Offset Rate Tailwinds

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BDCs: 2Q26 Preview Remain Cautious on BDCs. Establishing Dec-2027 PTs (No Rating Changes). Credit Headwinds & Muted Rotation Fully Offset Rate Tailwinds

J P M O R G A N North America Equity Research

02 July 2026

BDCs: 2Q26 Preview

Remain Cautious on BDCs. Establishing Dec-2027 PTs

(No Rating Changes). Credit Headwinds & Muted

Rotation Fully Offset Rate Tailwinds

As we approach 2Q26 earnings season for BDCs, we expect a quarter defined less Consumer Finance

ACby the drama of 1Q26 and more by incremental developments on the recurring Richard Shane

issues that have dominated the year: credit trends, NAV marks, and dividend (1-415) 315-6701

coverage. While we expect a steadier tone, we would not characterize the backdrop richard.b.shane@jpmorgan.com

as an all-clear. Management teams have indicated that transaction activity is J.P. Morgan Securities LLC

beginning to improve, even if we expect only a modest rebound in 2Q.

The authors wish to thank Prakhar Rai, ofOn rates, the June FOMC delivered a “hawkish hold”. With the market having

shifted away from an easing bias, higher base rates would be a modest positive for the J.P. Morgan Global Research Center,

net investment income. We would caution, however, against reading that as for contributions to this report.

unambiguously constructive. Unlike the 2022 hike cycle, when rising rates stood

in front of a credit backdrop that had largely healed post-COVID, credit appears

to be softening. While results will vary by company, we expect the impact of rising

non-accruals to offset the benefit of higher rates, leaving net interest margins flat

to down slightly for most names. This is a dynamic compounded by slower

portfolio turnover that limits how quickly capital can rotate into today's wider-

spread vintages.