Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
HSBC is yet to invest billions of dollars into its own private credit strategy almost a year after announcing the move as Europe’s largest lender reels from a $400mn hit linked to an Apollo-owned credit fund.
The London-listed bank said in early June last year that it would inject $4bn into its own asset manager’s range of private credit funds.
However, no funds have yet been transferred and there were no current plans to do so, according to two sources familiar with the decision-making process.
The private credit allocation was initially billed as a way for HSBC to leverage its $3.2tn balance sheet to muscle its way to the top table of alternative lending alongside private capital giants such as Apollo and Blackstone.
When discussing the commitment last year, HSBC’s head of asset management Nicolas Moreau told Reuters that “we see this as an arms race”.
The pause comes at a time in which the multitrillion-dollar non-bank lending industry has been shaken by alleged frauds by borrowers and questions over underlying asset valuations as well as a wave of retail and wealth withdrawals from funds including those managed by Blue Owl.
One person familiar with HSBC’s failure to deliver on the commitment said that executives had grown wary of the investment amid wobbles in the US private credit market.
HSBC said it was “committed to our asset management’s offering in private credit funds”.
HSBC suffered a $400mn charge related to back-leverage financing to a unit of Apollo in the first quarter. Shares fell more than 6 per cent after the bank revealed the hit in its annual results on May 5. Nonetheless, they have gained 12 per cent since the start of the year.
The charge surprised analysts as HSBC, unlike rivals Barclays and Santander, had not lent directly to Market Financial Solutions, the collapsed UK mortgage lender.
Administrators overseeing the insolvency of MFS have accused the collapsed lender’s owner, Paresh Raja, of misappropriating at least £1.3bn.
HSBC’s indirect exposure via one of Apollo’s private-credit units makes it one of the banks hit hardest by the collapse of MFS.
The bank said that in the first quarter its private markets exposure was only 2 per cent of its total $1tn loan book, with “pure” private credit at just $6bn.
