Abstract: Using data for the United States over the period 1966Q1 to 2019Q4, we find that household credit expansions increase the probability of a banking industry crash and reduce this industry’s excess returns in one to three years. For business credit, the effects are lower compared to household credit and are mostly insignificant. Furthermore, we observe that an increase in household credit induced by a reduction in mortgage spread change leads to a reduction in excess returns with the magnitude of the effect being higher. Our results show that private credit expansions hurt the banking sector mostly through the household credit channel.