BofA mobilizes a large private‑credit war chest

Bank of America is setting aside about $25 billion to originate or fund privately negotiated loans, putting its balance sheet squarely into the direct lending arena.

This decision is part of a broader trend: several global banks have recently directed sizeable capital to private lending. For context, one rival previously earmarked roughly $50 billion for similar activity from its own balance sheet.

Traditional lenders are responding to a market where non-bank managers supply large portions of bespoke loans to corporations, including borrowers perceived as higher risk or buyers financing leveraged deals. Banks aim to capture yield and client relationships that have migrated outside standard syndicated loans.

Market volatility around private capital firms has sharpened since a prominent alternative manager froze withdrawals at a fund and sold holdings to reduce leverage. Stocks of several asset managers dropped in the session following that announcement, moving in the range of 4%–6%.

Industry moves are not limited to balance‑sheet allocations: other investment banks have reorganized or launched dedicated units to scale private-credit capabilities, embedding lending and advisory functions into single platforms.

Observers point to two tensions. One is a race for profitable lending opportunities as banks chase fee and interest income. The other is the risk profile of the loans themselves — quicker underwriting and less public disclosure can amplify credit and liquidity risks across the system.

Regulatory and investor attention is likely to follow: increased bank participation changes counterparty and concentration dynamics and could alter capital and conduct considerations for both banks and private funds.

Strategic partnerships and joint programs have also proliferated; in one recent example, a major bank teamed with an asset manager on a multi‑billion dollar private lending effort, demonstrating the hybrid approaches firms use to scale exposure.

For corporate borrowers, the expanding supply of bank-originated private credit may lower execution times and widen the pool of potential lenders — but it may also compress spreads and increase competition for attractive deals.

In sum, Wall Street is shifting more mainstream balance-sheet capacity into bespoke lending, a change that will affect returns, risk allocation, and the competitive landscape for alternative credit managers over the coming quarters.