JPMorgan is to invest $65 billion in private credit – $50 billion from its balance sheet and $15 billion from co-lenders.
JPMorgan CEO Jamie Dimon has been vocal about the threat to banks from private credit funds. He has spoken about bank capital requirement changes after 2008 making it harder for banks to compete with private credit funds, and problematic accounting (valuation) practices by some private credit funds.
JPMorgan has invested over $10 billion across more than 100 private credit deals since 2021.
JPMorgan has an edge over private credit funds – in that it can offer clients direct private credit loans, syndicated loans and bonds – together with ancillary products like derivatives for their transactions. They already have relationships with an enormous client base – banking 80,000 companies globally through their Commercial and Investment Bank, including 32,000 US middle market clients.
JPMorgan’s difficulty is that bank capital charges for some loans might be high.
Strategically, it may make sense for JPMorgan to accept higher costs through bank capital charges – to avoid private credit funds from eroding the bank’s market share of being the borrowing solutions provider to companies.
In a press release, JPMorgan said: “As private credit has grown exponentially to a $2 trillion market, direct lenders are sitting on hundreds of billions of dollars of dry powder to deploy.”. Deployment into good quality assets is becoming more difficult as the number of private credit lenders and the amount of capital that needs to be deployed increase.