Citigroup & Apollo Global Launch $25B Lending Program

Discover how Citigroup and Apollo Global's $25B partnership signals a new era in private credit and direct lending within a $2 trillion market.

Citigroup (C.N) and Apollo Global (APO.N) have forged a significant partnership, embarking on a $25 billion private credit and direct lending initiative. This collaboration exemplifies the burgeoning synergy between traditional banking institutions and non-bank entities, both vying for a share of the tantalizing $2 trillion private credit market. Notably, the Abu Dhabi sovereign wealth fund, Mubadala Investment Company, alongside Apollo's annuity and retirement services division, Athene, will also play a role in this ambitious program, as announced by the companies on Thursday.

Citigroup and Apollo Global Launch $25B Lending Program

In the trading arena, Citigroup's shares experienced a notable uptick, rising by 2.4% in afternoon transactions, while Apollo's stock saw a modest increase of 0.6%. The term "private credit" refers to loans dispensed by non-bank lenders, such as Apollo, which operate under a different regulatory framework than their banking counterparts. These loans are often extended to higher-risk borrowers or corporations seeking to execute substantial buyouts through leveraged debt. The allure of private credit lies in its expedited processing times, making it a vital funding source for entities deemed too precarious by conventional banks.

Initially perceived as a potential adversary to traditional banking, private credit firms have recently pivoted towards collaboration with established lenders. This strategic alliance allows banks to efficiently identify clientele while reaping fees without exposing their own capital to risk. Earlier this year, in January, Citigroup unveiled another private lending vehicle in conjunction with alternative investment manager LuminArx Capital, further solidifying its commitment to this burgeoning sector.

The current program will primarily target North America, although there are aspirations for geographical expansion and potential growth beyond the initial $25 billion threshold, as indicated by the companies. In a related development, Apollo secured a substantial $5 billion commitment from BNP Paribas (BNPP.PA) to bolster its private credit capabilities.

However, the private credit market is not without its critics. A report released in April by the International Monetary Fund underscored the necessity for heightened scrutiny of this sector, citing its opaque and intricately interconnected nature as a potential catalyst for systemic risks within the broader financial ecosystem. As the landscape of private credit continues to evolve, the interplay between regulation, risk, and opportunity remains a focal point for industry stakeholders.