LONDON, Apr 11 (Reuters): HSBC is preparing a foray into the white-hot market for private credit, five sources with knowledge of the plans said, the latest move by a global bank to get in on the booming sector.
HSBC's plan, reported here for the first time, shows how the bank is looking at ways to increase revenue after months of restructuring, job cuts and its biggest retrenchment from investment banking in decades.
HSBC has held talks with private credit firms about a potential partnership, two of the sources said, without identifying them. The talks are at various stages and there can be no certainty that they will lead to a formal partnership, the sources said.
The bank is likely to stop short of a full-blown push into private credit as some rivals have done, as senior executives, including CEO Georges Elhedery, are sceptical the revenue will outweigh the costs, one of the sources with knowledge of management's thinking said.
US President Donald Trump's sweeping tariffs have also impacted near-term demand for credit as corporate borrowers take stock of the turmoil, meaning HSBC will take a more cautious approach, a third source said.
A spokesperson for HSBC declined to comment.
When banks team up with private credit firms, the latter typically provide the loan while banks earn fees for finding the customer and arranging the deal. The tie-ups enable banks to maintain customer relationships with limited or no risk to their capital.
Lightly regulated private credit providers - such as asset managers - are rapidly gaining market share from banks, which have pulled back from financing riskier clients because of capital and regulatory constraints.
Banks can regain some of that business by via deals with private credit firms, as Citi did with Apollo last year.
HSBC may not go as far as creating a separate unit or team to handle private credit, as other banks have done amid concerns about costs, two of the sources said.
