Banks and Private Credit Giants Are Merging Their Business Models, and CLO Market Data Shows It

J.P. Morgan announced at its Global Leveraged Finance Conference on February 24, 2025, that it was allocating $50 billion from its own balance sheet to direct lending, together with nearly $15 billion from co-lenders. That's $65 billion in combined capacity, according to ABF Journal's reporting on the bank's announcement. J.P. Morgan said it had deployed more than $10 billion across more than 100 private credit transactions since 2021.

Citigroup and Apollo announced a $25 billion direct lending program together in September 2024, calling it the largest partnership of its kind at the time, according to their joint press release. Mubadala Investment Company and Apollo's insurance subsidiary Athene are also participants. Both firms said they expected client demand strong enough to expand the program beyond the initial $25 billion.

Wells Fargo took a different approach with Centerbridge Partners, setting up a business development company called Overland Advantage that Centerbridge controls and Wells Fargo backs as a minority investor and deal-sourcing partner. As of January 2026, Overland had deployed more than $7 billion since launch, according to Bloomberg reporting confirmed by a disclosure on Centerbridge's website. In 2025 alone, Overland financed 18 transactions with an aggregate value of approximately $4 billion, according to a press release from Overland Advantage, with a stated focus on non-sponsored, founder-owned and family-owned middle market companies — a segment where Wells Fargo's commercial banking relationships provide access a standalone alternative manager would struggle to replicate at scale.

Why banks are doing this instead of just lending themselves

The driver is regulatory, not sentimental. Basel III Endgame proposals raised the cost of banks holding leveraged loans directly on their balance sheets. At the same time, the largest alternative credit managers had accumulated capital bases so large that chasing individual $40 million unitranche transactions stopped making mathematical sense for them either, according to ABF Journal's reporting.

The fix: banks bring origination reach and existing client relationships. Private credit managers bring capital that sits outside the bank regulatory perimeter. Neither side could build this as efficiently alone, which is why, per ABF Journal, the model had moved well beyond pilot status by early 2025.

What the CLO market shows about pricing

Collateralized loan obligation issuance is a separate but related barometer. Broadly syndicated CLO new issuance rose to $3.7 billion, with Triple-A tranches pricing at 121 to 131 basis points, according to CreditSights data published August 3, 2026. Refinancing activity is declining even as new issuance climbs, per the same report.

That data point matters because CLOs are a major buyer of the same leveraged loans that banks and private credit funds are now co-originating. If CLO demand stays strong and spreads hold, it suggests investors aren't demanding much more compensation to hold this risk. Falling refinancing activity alongside rising new issuance could also indicate issuers are locking in current terms.

How private credit managers are actually pricing risk

Steve Kuppenheimer, Head of Private Investments at Lord Abbett, laid out the mechanics on the firm's Investment Conversation podcast. Base rates track SOFR, which he said was about 3.81%. Spreads on top of that run from the high 400s to high 500s basis points. Add an upfront original issue discount of 50 to 200 basis points, plus a call protection fee if a loan repays early, and that's the full economic picture on a funded loan.

Kuppenheimer said spreads have widened industry-wide this year while defaults have remained relatively contained, even as retail investors have watched headlines about liquidity concerns tied to exposure in sectors like artificial intelligence software. He said Lord Abbett will pass on a loan entirely if it doesn't like the underlying credit risk, rather than demand a higher spread to compensate for it. Fundraising into private credit has stayed net positive despite the retail redemption stories, he said, and not just at Lord Abbett but industry-wide.

The unresolved question

Private credit funds generally aren't subject to the same capital and disclosure rules banks are, which is precisely the tension driving banks to partner with them instead of competing directly. That regulatory gap is a feature for the industry's growth, not an accident. Whether it becomes a blind spot if defaults eventually rise past today's "relatively contained" levels, as Kuppenheimer put it, is a question none of these data points answer. The growth is real and disclosed on both sides. What happens to spreads and CLO pricing if the credit cycle turns is the open question the market hasn't been forced to answer yet.