JPMorgan Reportedly Looking to Expand Private Credit Business

JPMorgan Chase is reportedly moving deeper into the uber-popular world of private credit.

That’s according to a report Thursday (May 23) by Bloomberg News, which notes that the banking giant is hoping to bolster its $3.6 trillion asset management business.

Sources tell Bloomberg that JPMorgan held discussions recently to purchase the Chicago-based Monroe Capital, though both sides ultimately decided to walk away.  A spokesperson for JPMorgan declined to comment when reached by PYMNTS.

The Bloomberg report notes that JPMorgan’s investment bank has already set aside more than $10 billion for direct lending, and is also forming a partnership with asset managers to join it in private credit deals.

The bank’s asset management arm, handling money for pension funds and endowments as well as wealthy individuals, aims to expand its private credit offerings, the report said. Per Bloomberg, that side of the business oversaw $17 billion in private credit assets at the end of last year, which is less than the nearly $19 billion that Monroe had as of April 1.

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

Those digital and private firms also “do not have the same transparency or need to abide by the extensive rules and regulations as traditional banks, even if they offer similar products — this often gives them significant advantage,” Dimon wrote, using the example startup banks and FinTech banks.

He also mentioned tech behemoth Apple, saying that it “effectively acts as a bank — it holds money, moves money, lends money, and so on.”

There are some advantages here, Dimon said — chiefly in the form of “dynamism and churn [that] are good for innovation and invention — with success and failure simply part of the robust process. Innovation runs across payments systems, budgeting, digital access, product extensions, risk and fraud prevention, and other services.”

Meanwhile, Federal Reserve Governor Lisa Cook warned in a speech earlier this month that the private credit market is an emerging area of concern.

Private credit funds’ assets under management have grown rapidly in the past few years and may involve “weak underwriting or excessive risk appetite,” she said.

These funds seem to be well positioned to manage those risks, Cook added. But they have increasing ties with traditional financial institutions, and banks are increasingly setting up their own private credit deals.

“As a result, I will be monitoring the contribution of private credit to the overall leverage of the business sector and the evolving interconnectedness between private credit and the rest of the financial system,” Cook said during a speech at the Brookings Institute in Washington.