A Wall Street bank just teamed up with a giant private lender to do the kind of lending banks used to own.
Citi said Monday it's joining HPS Investment Partners on a 15 billion euro ($17.5 billion) lending push in Europe. HPS is the private credit arm BlackRock just bought.
The size of the deal is the headline. The real story is who runs the lending game now.
How The Deal Is Built
The plan is called the Citi/HPS Private Capital Program, and it works like a split of jobs.
Citi will use its bank ties in Europe, the UK, and later the Middle East to find borrowers. HPS will write the checks.
HPS sits on $381 billion of private financing assets, so there's no shortage of money on its end.
Both senior and junior debt are on the table. That covers the full range of loans short of the safest investment-grade stuff.
The target is sub-investment grade borrowers. In plain English, those are firms that don't have the cleanest credit.
After the 2008 crash, new rules made it costly for banks to lend to those firms. Private lenders walked into the gap and never left.
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Why Citi Needed This Partner
Private credit means loans made by funds and firms, not banks. In about a decade, the market has grown from a sleepy corner to roughly $2 trillion in size.
Banks like Citi still have the client ties. But the lending margins on sub-investment grade debt mostly flow to the private side now.
So Citi sources the deals while HPS funds them. That lets Citi stay in the game without sitting on the loans itself.
The setup is also a hedge against fee pressure. If a deal goes bad, HPS takes the hit, not Citi.
"This Program is designed to directly support our clients' strategic objectives across the EMEA region by combining Citi's deep client relationships and origination strength with their significant capital and structuring expertise," said John McAuley, Co-Head of Debt Capital Markets at Citi.
For BlackRock, this is the first big public win from its HPS buy. CEO Larry Fink has long said private credit is a top priority.
This is what that looks like in practice.
What To Watch
The 15 billion euro goal stretches over five years, so this is not a one-quarter story.
The thing to watch is how fast deals flow through the pipe. The other thing to watch is whether other banks copy the playbook.
European firms lean on bank loans more than U.S. firms do.
If Citi and HPS shift that mix even a little, the next round of bank-fund deals is already in the works.
Citi already runs a similar $25 billion direct lending program with Apollo, announced in 2024 and focused mostly on North America. The HPS deal is the European version of that same playbook.
Goldman Sachs, JPMorgan, and Wells Fargo have struck their own tie-ups with private lenders in the past two years.
Wall Street is not pulling out of private credit. It's just renting it now.
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