JPMorgan Chase is reportedly moving deeper into the ultra-popular world of private credit.
It is according to a report Thursday, May 23, per Bloomberg News, which notes that the banking giant hopes to bolster its $3.6 trillion asset management business.
Sources tell Bloomberg that JPMorgan recently held discussions to buy Chicago-based Monroe Capital, although both parties ultimately decided to walk away. A JPMorgan spokesperson declined to comment when contacted 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 partnering with asset managers to join it in private credit operations .
The bank’s asset management arm, which manages money for pension funds and endowments as well as high-net-worth individuals, aims to expand its private credit offering, the report said. According to 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 Monroe had as of April 1.
In his annual letter to shareholders last month, JPMorgan CEO Jamie Dimon asserted that “the banking system as we know it is shrinking relative to private markets and fintechwhich are growing and becoming more and more competitive.
These digital, private companies also “do not have the same transparency or need to follow detailed rules and regulations as traditional banks, even if they offer similar products – this often gives them a significant advantage,” wrote Dimon, using the example of startups. and FinTech banks.
He also mentioned tech giant Apple, saying it “effectively acts like a bank – he holds money, moves it, lends it, etc.
There are some benefits here, Dimon said – mainly in the form of “momentum and churn (which) are good for innovation and invention – with success and failure simply being part of the robust process.” Innovation extends to payment systems, budgeting, digital access, product extensions, risk and fraud prevention, and other services.
In the meantime, Federal Reserve Gov. Lisa Cook warned in a speech earlier this month that the private credit market was an emerging area of concern.
Assets under management of private credit funds have grown rapidly in recent years and may involve “low underwriting or excessive risk appetite“, she said.
These funds appear well positioned to manage these risks, Cook added. But they maintain increasingly close ties with traditional financial institutions, and banks are increasingly setting up their own private credit operations.
“Accordingly, I will monitor the contribution of private credit to the overall leverage of the corporate sector and the evolving interconnectedness between private credit and the rest of the financial system,” Cook said in a speech at the Brookings Institute in Washington.