Big banks and alternative asset managers are finding new ways to work together as new regulations loom.
Just this week,
Wells Fargo
(ticker: WFC) and Centerbridge Partners announced that they are partnering to offer direct lending to middle-market companies. Centerbridge, which plans to launch Overland Advisors under the tie-up, will source from Wells Fargo’s client base, while the San Francisco–based bank will get an equity stake in the endeavor.
The deal “will help us elevate our support of middle-market clients,” said Wells Fargo CEO Charlie Scharf in a statement.
While Centerbridge and Wells Fargo began hashing out details of a partnership in 2022, the announcement comes at an interesting time. Banks will soon be required to hold more capital against assets on their balance sheets, according to proposed regulations unveiled this summer. The net effect of these regulations means that banks will probably restrict lending and will look for off-balance sheet methods to keep clients and maintain profitability.
“Capital requirements are going up, and banks have got to earn a reasonable return on equity,” Chris Kotowski, an analyst at Oppenheimer, told Barron’s, adding that he expects to see more examples of banks and alternative-asset managers finding ways to work together.
Bank CEOs have complained about the new regs, with
JPMorgan Chase
(JPM) CEO Jamie Dimon saying in July that hedge funds and private-equity funds were “dancing in the streets” over the windfall they were about to receive as banks pulled back.
Write to Carleton English at [email protected]
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