Citigroup and Apollo Global Collaborate on Private Credit Program

By Niket Nishant
(Reuters) – Citigroup and Apollo Global have partnered for a $25 billion private credit and direct lending program, demonstrating a growing alliance between banks and non-banks targeting a share of the $2 trillion market.

Participants:
Abu Dhabi’s Mubadala Investment Company and Apollo’s Athene, an annuity and retirement services unit, will also join the program, as announced on Thursday.

Citi shares increased by 2.4% while Apollo’s rose 0.6% during afternoon trading.

What is Private Credit?
Private credit involves loans provided by non-bank lenders like Apollo, facing lesser regulations compared to banks. These loans often go to risky borrowers or firms pursuing large buyouts funded through debt. They can be processed more rapidly than traditional bank loans, essential for borrowers considered too risky by conventional banks.

Evolving Partnerships:
Initially perceived as a threat to banks, private credit firms are increasingly partnering with traditional lenders. Banks facilitate customer acquisition while earning fees without exposing their own capital.

In January, Citi launched another private lending initiative alongside alternative investment manager LuminArx Capital.

Citi’s banking head, Viswas Raghavan, stated, “Combining the strength of Citi’s banking and capital markets franchise with Apollo’s deep capital resources will provide clients with a range of options to meet their evolving financing needs.”

The program targets North America initially, with plans to expand further and possibly exceed the $25 billion goal.

Ana Arsov, global head of private credit at Moody’s Ratings, noted, “The partnership is yet another example of the rapid growth of Private Credit into mainstream finance.”

In addition, Apollo secured a $5 billion commitment from BNP Paribas last week to bolster its private credit capabilities.

The International Monetary Fund released an April report urging closer scrutiny of the private credit market due to its opaque and interconnected nature, which could pose systemic risks to the broader financial system.