JPMorgan Chase & Co. is reportedly moving deeper into the highly popular world of private credit.
This was reported by Bloomberg News on Thursday (May 23), according to the paper, which said the banking giant wants to bolster its $3.6 trillion asset management business.
Sources said JPMorgan recently discussed acquiring Chicago-based Monroe Capital, but both sides ultimately decided against it. A JPMorgan spokesperson declined to comment when contacted by PYMNTS.
Bloomberg reported that JPMorgan's investment banks have already set aside more than $10 billion for direct lending and are also working to partner with asset managers to participate in private credit transactions.
The bank's asset management unit, which handles money from pension funds, endowments and wealthy individuals, is looking to expand its private credit offerings, according to the report. The unit managed $17 billion in private credit assets at the end of last year, down from the roughly $19 billion Monroe had as of April 1, according to Bloomberg.
“The banking system as we know it is changing rapidly due to growing and increasingly competitive private markets and fintechs,” JPMorgan CEO Jamie Dimon said in his annual letter to shareholders last month. “It has shrunk compared to the previous year.”
It also notes that these digital and private companies “don't have the same transparency as traditional banks, and even if they offer similar products, they often don't have to adhere to extensive rules and regulations. , they have a significant advantage,” Dimon wrote, citing emerging and fintech banks as examples.
He also pointed to tech giant Apple, saying the company “effectively acts as a bank – it holds money, it moves money, it lends money.”
There are some benefits here, Dimon said, mainly in the form of “dynamism and churn.” [that] Innovation and invention are good. Success and failure are just part of a robust process. Innovation spans payment systems, budgeting, digital access, product enhancements, risk and fraud prevention, and other services.”
Meanwhile, Federal Reserve President Lisa Cook warned in a speech earlier this month that private credit markets have become a new area of concern.
Private credit funds' assets under management have grown rapidly in recent years, which could be linked to “weak underwriting or excessive risk appetite,” he said.
Cook added that these funds appear well-positioned to manage these risks. But these funds are increasingly tied to traditional financial institutions, and banks are increasingly launching their own private credit deals.
“As a result, I will be monitoring how private credit contributes to leverage across the business sector and how the interconnectedness of private credit with other parts of the financial system is evolving,” Cook said in a speech at the Brookings Institution in Washington.
