A chorus of Wall Street titans has declared that the private credit market is on a collision course with traditional bank lending, with some predicting a blurring of lines in the near future, Bloomberg reports.
Apollo Global Management’s Marc Rowan, a prominent figure in the private credit sphere, believes that within just 18 months, borrowers will struggle to differentiate between offerings from private credit firms and traditional banks. This comes as the $1.7 trillion private credit market continues to expand, attracting capital from both private and non-investment-grade companies who find it challenging to secure traditional bank financing.
The shift is causing unease among Wall Street giants like Citigroup and Goldman Sachs, who traditionally dominated the corporate lending landscape. While these banks have previously dismissed the threat posed by private credit firms, the growing influence is becoming increasingly undeniable.
“There’s going to be a blur,” Rowan asserted during a panel discussion at the Future Investment Initiative in Riyadh. “We will not know – in the investment grade landscape – the difference between public and private 18 months from now. It’s going to be the same types of companies, the same rating, the same size.”
However, big banks are not surrendering without a fight. Many are actively partnering with private credit firms, seeking to retain clients and maintain their revenue streams. Citigroup, for instance, recently announced a five-year, $25 billion financing partnership with Apollo, focusing initially on non-investment grade lending in North America.
Goldman Sachs has enabled its asset management clients to funnel $140 billion into private credit, demonstrating its commitment to participating in this growing market.
“We manage significant private credit assets but we also have one of the leading syndication franchises,” Goldman Sachs CEO David Solomon highlighted. “So we have an ability to originate and distribute in addition to being an investor through our asset management business. That’s a very unique combination.”
Carlyle Group CEO Harvey Mitchell Schwartz, a former Goldman executive, attributes the rise of private credit to companies choosing to remain private for longer and bank regulations making lending to these companies more difficult.
