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AI · Banking · Private Credit · Software
JPMorgan Chase and other major banks are navigating the ongoing private credit downturn, characterized by individual investor withdrawals, high-profile defaults, and redemption limits, particularly impacting software companies and alternative asset managers like Apollo, Blue Owl, Ares, and Blackstone, whose shares have dropped 30% or more.
Jamie Dimon, JPMorgan Chase CEO, has long been skeptical of private credit, ordering a full inspection of the bank's loan books for software company exposure. JPMorgan restricted credit access for some funds based on their exposure and created strategies for clients to bet against private credit-exposed companies.
This dynamic arises as private credit has taken market share from banks since the 2008-09 financial crisis. Banks, including JPMorgan and Goldman Sachs, are simultaneously clients and competitors of private-capital firms, lending billions directly and launching their own initiatives.
Bank of America retracted a similar "bet against" strategy, apologizing for the misstep. JPMorgan estimates software debt accounts for approximately 30% of all private-credit loans outstanding, compared to 10% for bank-originated debts.
Shares in alternative asset managers like Blue Owl, Ares, and Blackstone have fallen 30% or more, while the S&P’s Software & Services Select Industry Index is down 20%, and the KBW Nasdaq Bank Index is down 8%. JPMorgan has $50 billion committed to private loans and is tracking risk, especially with AI concerns impacting software.
The bank faces hurdles selling billions in debt for tech companies like Qualtrics, but successfully launched an $8 billion bond sale for Electronic Arts, demonstrating varied investor demand.
Banks' Private Credit Ties Raise Systemic Risk
JPMorgan, Banks Navigate Private Credit Turmoil(current)
