Internal memo seen by Reuters on Thursday reported that the Bank of America is investing $25 billion in private credit deals, as the Wall Street giant assembles a war chest to continue its advance in the lucrative part of finance.
The conventional banks, like BofA, have been competing with private credit supplied by alternative asset managers.
Private credit has been a significant key financing source for corporate America as tighter post‑crisis lending standards pushed borrowers to secure capital outside traditional banks.
The action of BofA highlights a wider trend by Wall Street giants, such as other competitor JPMorgan Chase, to compete with private credit providers, which are frequently subject to less capital and regulatory requirements.
JPMorgan stated last year that it would be deploying $50 billion of its balance sheet to offer personal credit to customers. Goldman Sachs also established a new business unit in its drive towards the profitable market.
Private credit is a type of loan that is extended by non-bank lenders and is usually extended to risky borrowers or businesses that need to finance mega buyouts using debt.
However, these loans can be done faster, and they are a significant source of funding for borrowers who are too vulnerable. The issue of credit quality and exposure to AI-prone software stocks has put a new dark cloud on the already booming market of privately-issued credit.
Shares of alternative asset managers were actively sold previously when a private capital firm, earlier on Thursday, Blue Owl Capital, permanently suspended redemptions in one of its funds and sold some assets to pay down debt.
Apollo Global Management, Blackstone, KKR, Ares, and Carlyle Group dropped between 4 percent and 6 percent in normal trade. Citigroup and Apollo collaborated in a $25 billion private credit and direct lending initiative in 2024.
