HSBC retreats from riskier private credit lending: FT

[HONG KONG] HSBC is halting lending to riskier private credit funds, after high-profile corporate bankruptcies exposed shaky underwriting standards in industry, the Financial Times (FT) reported.

Europe’s largest bank informed clients in recent weeks that it will not renew certain credit facilities or provide back leverage, the FT said, citing sources familiar with the matter.

HSBC determined that returns from specific private credit funds no longer justified the underlying risks, according to the newspaper. Moving forward, the London-based lender will focus its capital on less risky funds.

The pullback underscores growing anxiety among traditional banks over their exposure to the private credit market, which has ballooned during the era of higher interest rates but faces mounting pressure from corporate defaults.

Some big banks are raising rates for the leverage they provide, and they are also marking down specific loans posted as collateral.

Behind the scenes, that’s prompting private credit fund managers to swap out holdings from the pools as banks including JPMorgan Chase, Goldman Sachs and Barclays exercise their right to write down individual assets, sources involved in such talks have said earlier. BLOOMBERG