JPMorgan (JPM) May Expand Private Credit Business via Buyout

As part of its efforts to augment its $3.6 trillion asset management division, JPMorgan JPM is contemplating acquiring a private credit firm. This was first reported by Bloomberg.

Further, sources informed Bloomberg that earlier this year, JPMorgan had held discussions to acquire the Chicago-based Monroe Capital, but ultimately, both firms decided not to pursue the transaction. In February, it was reported that JPM is close to finalizing a partnership with FS Investments and Octagon Credit Investors. However, no further update is available on this at present.

JPMorgan has already set aside more than $10 billion for direct lending and is forming partnerships with asset managers with an aim to join them in private credit deals.

Even at its Investor Day conference earlier this week, the company’s top executives spoke about inordinate growth opportunities in the private credit business. Troy Rohrbaugh, co-CEO of the Commercial and Investment Banking segment, said, “Private credit is a very important growing space and we believe we have an advanced strategy across the entire commercial and investment bank. We believe we are uniquely positioned to be an important part of all aspects of the ecosystem.”

Earlier, in his annual letter to shareholders, JPMorgan CEO Jamie Dimon stated that “the banking system as we know it is shrinking relative to private markets and fintech, which are growing and becoming increasingly competitive.”

With a huge capital base, JPMorgan is looking into ways to utilize it efficiently. One way will be to acquire a private credit entity and move deeper into this lucrative business.

So far this year, shares of this Zacks Rank #3 (Hold) bank have rallied 15.8%, outperforming the industry’s growth of 15.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Given that the $17 trillion global private credit space has been eating into the market share of the leveraged loan and high-yield bond markets, several global banks have been searching for ways to remain competitive.

Several global firms like Goldman GS and Barclays BCS have ventured into this space, forming partnerships with investment firms to capitalize on the growing demand for alternative financing options.

Last month, BCS made a push into the private credit market. The company, along with AGL Credit Management, announced a cooperation agreement and the launch of a private credit investment platform, AGL Private Credit. Likewise, this February, GS entered into a partnership with Mubadala Investment, an Abu Dhabi-based sovereign wealth fund, to invest $1 billion in private credit deals in multiple Asia-Pacific markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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