This move is part of Citigroup’s strategy to establish a foothold in the growing private credit market, where traditional banks have been withdrawing from riskier lending.
The collaboration aims to finance a minimum of USD 25 billion in private equity and corporate loans over the coming years, with a target of USD 5 billion in the first year. Loans will be sourced by Citigroup’s investment banking team and funded by Apollo, utilizing capital from its direct lending funds, insurance subsidiary Athene, and Abu Dhabi's sovereign wealth fund, Mubadala.
This partnership is expected to bolster Apollo’s credit business, which currently represents more than 70% of the firm’s nearly USD 700 billion in assets. Apollo has primarily focused on investment-grade bonds and loans, which can be placed with insurers that require lower-risk investments. The collaboration with Citigroup will allow Apollo to access higher-yielding, albeit riskier, investments, including loans for funding buyouts.
Citigroup's decision to partner with Apollo comes as the bank seeks to regain market share from asset managers that have increasingly targeted its high-value clients. Competitors like Wells Fargo and JPMorgan Chase are also making significant investments in private loans through joint ventures and dedicated funds.
Historically, banks have been hesitant to engage in the types of loans favoured by private credit firms due to regulatory standards. Citigroup hopes that this partnership will help revitalize its investment banking division, which has struggled to maintain competitiveness. Recently, the bank was chosen by Mars to advise on its USD 36 billion acquisition of Kellanova.
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