HSBC (HSBA.L), Europe’s largest bank, announced it will invest $4 billion in private loan funds to gain a share of the rapidly growing private credit market. This move is seen as part of a strategy by banks to turn to alternative financial areas at a time when traditional loan revenues are under pressure.
HSBC will direct this investment to HSBC Asset Management’s (HSBC AM) alternative loan funds. The aim is to create a $50 billion loan fund within the next five years by attracting external investors.
The global private loan market, with a total value reaching $2 trillion, provides an alternative to the traditional banking system by providing credit to companies that are not subject to high regulation.
Currently, private equity giants like Blackstone (BX.N) and Ares Management are among the leaders in this sector. However, large banks such as Citi (C.N) and UBS (UBSG.S) are also entering the market, often partnering with established firms like Apollo (APO.N) and General Atlantic. Other banks, such as Deutsche Bank (DBKGn.DE) and HSBC, have chosen to establish their own private lending structures. Speaking to Reuters, HSBC AM CEO Nicolas Moreau said, “This is practically an arms race,” adding that the group’s overall support would provide an advantage in attracting foreign capital. While the $4 billion investment may seem small compared to HSBC’s $3 trillion balance sheet, it aligns perfectly with CEO Georges Elhedery’s strategy of focusing on higher-yield areas instead of low-yield traditional loans. Reuters reported in April that HSBC was seeking new ways to accelerate growth in the private lending sector. He had reported.HSBC AM’s private lending unit, established in 2018, has utilized $7 billion in 150 transactions to date, but remains a small player compared to the giants of the sector. The new funds will be evaluated on a global scale; however, Moreau stated that priority will initially be given to direct lending in the UK and Asia, adding that growth will begin in these regions.
