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Major banks embrace private credit partnerships as they target non‑traditional lending
by Kellie Ell
PNC Financial Services Group and TCW Group are the latest to team up to launch a private credit platform, as non-traditional bank lending continues to attract established banks.
“The secular tailwind behind this is that banks continue to consolidate, in the US in particular,” says Matthew Bass, head of private alternatives at AllianceBernstein. “Regulation is also impacting banks, making it more important for them to partner with non-bank lenders to grow their business.”
Where borrowers once flocked almost exclusively to banks when in need of capital, a shift to private lenders began during the global financial crisis. The trend picked up steam as regional US bank lending declined in 2023.
Since then, asset managers have continued to increase their market share with record inflows to private credit strategies. These days, while some banks continue to battle it out with private credit lenders through direct lending, or in the syndicated BSL market, many have realised it’s easier to partner with them.
“Banks are now competing more with money market funds versus traditional deposits,” Bass said. “And there are a lot of lending businesses within banks that belong in banks, [such as] residential mortgage lending and consumer finance. They require significant infrastructure to originate and asset manage.”
Regulation is impacting banks
Matthew Bass
Head of private alternatives
AllianceBernstein
Bass adds that banks like to build multiple relationships with a company that is borrowing. They also need to diversify away from just deposits.
“That’s where asset managers step in. As opposed to just providing capital, we can partner with the bank to craft new products, and add more value than just providing capital,” he says.
Examples of bank and asset manager rivals turned teammates are plentiful. In April, AGL Credit Management and Barclays launched AGL Private Credit, a private credit investment platform that targets the growing intersection between the private credit, BSL and high yield bond markets.
“As the traditional leveraged finance and private credit markets continue to evolve, this is a synergistic extension of our market-leading specialised investment business,” said Peter Gleysteen, AGL founder, CEO and CIO, at the time.
Last autumn, Centerbridge Partners and Wells Fargo formed a direct lending partnership for non-sponsored North American middle market companies.
And earlier this year, Morgan Stanley’s global head of private credit, David Miller, said the firm’s asset management division plans to double its private credit portfolio to USD 50bn in the medium term.
The same trend is true for JP Morgan Chase, which is rumoured to be in talks to expand its private credit division.
In the case of PNC and TCW, the bank and asset management duo have a 15-year history. This joint venture will focus on direct lending to US middle market companies, while leveraging TCW’s credit experience and PNC’s client base.
The venture, which is expected to begin this autumn, will require a new management team. This group will focus on directly originated, senior-secured cashflow and asset-based loans to both sponsored and non-sponsored middle market companies. In addition,it will also be tasked with underwriting and portfolio management.
The platform is expected to have roughly USD 2.5bn in investor equity capital available to invest in the first year. PNC and insurance company Nippon Life are anchor investors.
“We are thrilled to partner with PNC to expand our direct lending,” said Katie Koch, president and chief executive officer of TCW, in a statement.
William S Demchak, chairman and CEO of PNC, added: “Combining the power and legacy of PNC’s broad lending capabilities with TCW’s private credit group will deliver significant benefit to companies seeking growth opportunities.”
