Major banks and private equity firms are joining forces to create powerful coalitions aimed at seizing a larger share of the $1.7 trillion private credit market. The latest collaboration features Citigroup and Apollo Global Management, which recently launched a $25 billion private credit fund focused on direct lending, marking the largest partnership between a big bank and a private equity firm to date.
“This is a win-win arrangement,” stated Apollo Co-President Jim Zelter in a press release. Citigroup’s executive vice chair, Viswas Raghavan, emphasized that the partnership will allow them to offer clients a variety of financing options without adding debt to the bank’s balance sheet.
Private credit, which encompasses all debt not issued or publicly traded, has grown significantly over the past decade, largely due to rising interest rates and regulations that have constrained banks’ leveraged lending activities. The private credit market has expanded from $41 billion in 2000 to an estimated $1.7 trillion today, while traditional bank loans exceed $12 trillion in the U.S.
Citigroup is not alone in pursuing this market. Recently, BNP Paribas announced a $5 billion partnership with Apollo’s subsidiary, Atlas, to focus on asset-backed institutional-grade credit. Similarly, Pittsburgh’s PNC bank formed a collaboration with asset manager TCW, while French bank Societe Generale and Brookfield are launching a €10 billion ($11.2 billion) private debt fund for infrastructure and private market financing.
Wells Fargo has also adopted a similar strategy, partnering with Centerbridge Partners to pass client financing opportunities to a business development company. CFO Mike Santomassimo noted that this approach allows the bank to remain relevant without carrying the debt on its own balance sheet.
Despite these alliances, the relationship between banks and private credit firms is complex. Ju-Hon Kwek, a senior partner at McKinsey, described banks and private credit funds as “frenemies,” often competing for financing deals while simultaneously collaborating. Kwek predicts that the private credit market will continue to expand, with $5 to $6 trillion in loans expected to shift from banks to private funds over the next decade, encompassing a range of financing needs from infrastructure projects to commercial real estate.
While some banks are forming partnerships, others like Goldman Sachs and JPMorgan Chase are opting to maintain independent platforms in the private credit sector. Goldman Sachs recently raised over $20 billion for its own private credit fund, while JPMorgan Chase has allocated $10 billion for direct lending, though it has not formalized partnerships yet.
JPMorgan CEO Jamie Dimon has voiced concerns about the rapid growth of private credit, warning that it could lead to unmonitored risks outside the regulated banking system. “I do expect there to be problems,” Dimon stated, cautioning that “there could be hell to pay” if retail investors in these funds suffer significant losses.
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