BofA commits $25 billion to private credit deals, memo shows

By Saeed Azhar and Ateev Bhandari

Feb 19 (Reuters) - Bank of America BAC.N is committing $25 billion to private credit deals, according to an internal memo seen by Reuters on Thursday, as the Wall Street giant prepares a war chest to further its advance in the lucrative slice of finance.

Traditional banks such as BofA have been competing with private credit supplied by alternative asset managers. Private credit has become a key financing source for corporate America as tighter post‑crisis lending standards pushed borrowers to seek capital outside traditional banks.

BofA's move underscores a broader push from Wall Street giants, including rival JPMorgan Chase JPM.N, to compete with private credit providers who often face lighter capital and regulatory requirements.

Last year, JPMorgan said it would be allocating $50 billion from its balance sheet to provide private credit to clients. Goldman Sachs GS.N also created a new division as part of its push into the lucrative market.

Private credit refers to loans provided by non-bank lenders, which are typically made to risky borrowers or companies looking to finance mega buyouts with debt.

These loans can be processed quicker, and are an important source of funding for borrowers deemed too vulnerable.

However, risks linger. Concerns over credit quality and exposure to AI-vulnerable software stocks have cast a renewed shadow over the burgeoning private credit market.

Earlier on Thursday, shares of alternative asset managers saw heavy selloff after private capital firm Blue Owl Capital OWL.N permanently halted redemptions at one of its funds and sold some assets to pay down debt.

Apollo Global Management APO.N, Blackstone BX.N, KKR KKR.N, Ares ARES.N, and Carlyle Group CG.O fell between 4% and 6% during regular trading.

In 2024, Citigroup C.N and Apollo partnered for a $25 billion private credit and direct lending program.