The turmoil facing U.S. regional banks has prompted some lenders to step back, leaving space for investors such as asset managers, private-equity (PE) funds and insurers to lend more, Reuters reported. Non-bank lenders with deep pockets have invested in credit assets for years, but the regional banking crisis could supercharge their expansion into areas such as providing consumer car loans and mortgages, or financing the construction of buildings, according to industry executives. A cooling U.S. economy has also prompted some large banks to rein in lending, leaving space for money managers to step in. Direct lending by non-bank creditors contrasts with the more widespread practice of banks underwriting debt that they can sell in secondary markets. PE and investment-management firms, including Ares Management Corp., Brookfield Asset Management and KKR, are lending in areas traditionally dominated by banks. In the consumer business, $550 million of loans for homeowners buying solar panels from SunPower will be financed by KKR, under an agreement announced earlier this month. Investors are also looking for real estate opportunities. When American Lions sought financing to build a 363-unit residential building in Long Island City, it got a $250 million loan from Brookfield Asset Management. Investors providing private credit comprise 12% of the $6.3 trillion U.S. commercial credit market, according to Fitch Ratings. That compares with regional banks, which account for $4.5 trillion in loans, or 40% of the U.S. total. The International Monetary Fund painted a different picture, warning in April that the expansion of private credit may have added vulnerabilities to the financial system and called for more supervision of non-banks. The lack of public information about the loans makes it difficult for markets and regulators to measure risks “until it is too late,” the fund wrote. Some PE executives reject that criticism. (Subscription required.)
