JPMorgan Chase (JPM)’s recent announcement of increasing its stake in private credit highlights a growing trend across the financial sector: major banks are increasingly partnering with private credit firms to broaden their reach in one of finance’s most dynamic areas. While the bank’s $50 billion commitment from its balance sheet reflects its rising confidence in this market, the additional $15 billion from co-lending partners underscores the broader shift toward deeper collaborations with private credit investors—partnerships that have moved well beyond the fringe. The bank’s move follows a $10 billion partnership forged last October with Cliffwater, FS Investments and Shenkman Capital Management. Meanwhile, Wells Fargo (WFC)’s partnership with Centerbridge has completed $2.8 billion in direct lending deals within its first year, further validating the viability of bank–private credit alliances. These partnerships represent a win-win scenario for both banks and private credit lenders, explaining their increasing prevalence and suggesting wider adoption beyond just the largest banks.
A changing landscape of finance
Banks pairing up with private credit lenders is not new, but the pace and scale of the recently announced deals illustrate a decisive shift. In the last two years alone, several of the largest financial institutions JPMorgan, Wells Fargo, Citi (partnered with Apollo) and PNC (teamed with TCW Group)—have unveiled major partnerships or specialized platforms targeting direct lending deals. Even certain regional banks, such as Webster Bank, have entered the fray, joining forces with asset managers like Marathon Asset Management to broaden their lending capabilities.
These alliances come at a time when the appetite for private credit is growing. Heightened regulatory pressures since the Global Financial Crisis have encouraged banks to de-risk their balance sheets, allowing private credit funds to meet demand from borrowers for funding that banks cannot provide. As a result, private credit is now estimated to represent over $1.6 trillion in global assets under management (AUM), according to Preqin. Much of that growth is attributed to direct lending, a subset of the private credit market in which private credit funds lend directly to businesses rather than relying on syndicated loans. According to leading market analysts, the direct lending market could nearly double to $1.4 trillion by the end of 2028, spurred by continued constraints on bank balance sheets, regulatory capital requirements and the recognized advantages of direct lending—speed, flexibility and simplicity—over more traditional financing options.
For private credit fund managers, directly partnering with a bank can open the door to a broad pipeline of high-quality borrowers. At the same time, banks can maintain key corporate relationships without tying up their balance sheet. These partnerships have grown from a niche arrangement into a viable strategic lever for both sides.
Banks’ Perspective
From the bank’s perspective, the appeal of these partnerships is clear. By leveraging a private credit partner’s deep capital base, a bank can alleviate pressures from regulations requiring heightened capital and liquidity buffers—especially relevant for larger institutions and those approaching thresholds for heightened regulatory scrutiny, such as Category II and III banks or those nearing Global Systemically Important Bank (GSIB) status, which applies to the largest, most interconnected banks deemed critical to global financial stability.” Rather than risk losing clients or diluting valuable borrower relationships, banks can steer selected deals into co-lending structures, maintaining their role as primary relationship managers while offloading a sizable portion of the credit risk. This arrangement also keeps ancillary income and deposit relationships intact, allowing the bank to earn fees for origination, servicing or advisory work.
Private Credit Firms’ Perspective
For their part, private credit firms stand to gain significant advantages by partnering with an established bank. Building a robust direct origination platform from scratch requires substantial resources, time and brand recognition. Collaborations with a bank—particularly with a far-reaching corporate client network—can shorten that timeline and expedite capital deployment. Moreover, a bank’s due diligence processes and institutional credibility can comfort prospective borrowers, making the direct lending proposition more palatable and efficient. Both sides benefit from combining the bank’s client relationships and regulatory sophistication with the private credit firm’s flexible capital and streamlined approval processes.
Beyond the biggest banks
While JPMorgan, Wells Fargo, Citi and other large institutions dominate the headlines, there is also significant potential for private credit partnerships among mid-sized and smaller banks. But while smaller regional and community banks represent the large majority of the over 4,000 banks in the United States, they often face more significant constraints, such as limited resources, fewer specialized personnel, and less familiarity with private credit structures, that would limit their ability to enter into complex partnerships with a private credit firm.
However, more than 30 of these institutions hold over $50 billion in assets, a level that typically provides the customer base, infrastructure and institutional knowledge necessary to meaningfully engage in direct-lending partnerships—even if they are not on the same scale as the largest multinational banks. While there is no definitive scale threshold for a successful private credit partnership, banks of this size are generally better equipped to build effective co-lending platforms. Moreover, although any adjustments to the supervisory regime for banks nearing $100 billion in assets are likely on hold under the Trump administration, any renewed regulatory initiatives in subsequent administrations could create additional impetus for these banks to pursue private credit collaborations.
Regardless of size, banks sometimes view private credit firms as competitors, particularly given their lighter regulatory burdens. Mismatched risk appetites and cultural differences can introduce further friction. Yet, banks that navigate these hurdles stand to preserve and expand key client relationships without shouldering potential credit risk. By carefully structuring co-lending agreements, they gain the ability to offer more substantial financing packages, boost fee income and tap into the expertise of private credit partners—ultimately managing risk more effectively.
Challenges and opportunities
No partnership is immune to complications. For banks, internal compliance and risk management processes must align with a private lender’s more agile business model. This often complex task can slow deal origination if not carefully orchestrated. Data sharing, due diligence and deal approvals should be clearly delineated so that each party understands its responsibilities and liabilities. Cultural and operational differences can lead to initial inefficiencies, but, as JPMorgan’s and Wells Fargo’s experiences suggest, skepticism typically diminishes once a partnership delivers results.
Potential policy shifts also loom large. Robust capital requirements and tight supervisory regimes have driven banks to seek alternative lending strategies—like private credit partnerships—to serve borrowers without straining their balance sheets. Yet, if the Trump administration rolls back certain regulations, it could reduce the motivation for banks to seek such partnerships. For instance, with a relaxation in capital rules or stress test requirements, banks might retain more loans in-house, at least until another regulation cycle tightens the reins again.
Looking ahead, the policy landscape is poised to influence the trajectory of bank–private credit collaborations. The Trump administration is expected to relax several capital standards, notably the Basel III “endgame” regulations, which are set to be implemented starting July 2025 and aim to significantly increase capital requirements for large banks. However, it is unlikely that capital requirements will revert to pre-2008 levels. Future administrations may tighten the regulatory environment again, especially if indicators of systemic risk or credit quality raise concerns. Consequently, the strategic rationale for bank–private credit partnerships is likely to remain robust: they provide banks with a flexible means to meet client demands without excessively burdening their balance sheets and enable private credit managers to deploy capital efficiently. Should leading institutions continue to demonstrate success and mid-sized banks follow their lead, these collaborations could become a permanent fixture in modern corporate finance rather than a transient trend.
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