JP Morgan reduces lending to the private credit sector

Stricter criteria for loans granted to private credit, especially, to software companies, which are more vulnerable to the challenges and impact of artificial intelligence. With this motivation, the US bank JP Morgan decided to lower the portfolio value of some loans to private credit groups. As written by the Financial Times, which first broke the news.

Revaluation of loans does not happen often, but this is not the first time banks have done so, claimed a source quoted by the British newspaper. Private lending refers to loans made by non-bank lenders typically to riskier borrowers or to companies financing large acquisitions. Although these loans can be disbursed quickly and are aimed at entities - too risky for banks to finance - growing concerns about credit quality and exposure to software companies vulnerable to the impact of artificial intelligence are slowing a hitherto fast-growing market.

This year, the industry witnessed a wave of investor claims due to fears of potential insolvencies by software companies.

Thus, in recent days, at the bank's Leveraged Finance Conference, JP Morgan CEO Jamie Dimon told investors that the bank is being more cautious about lending in the software sector. And also last week, BlackRock said it had limited withdrawals from a major bond fund after a surge in redemption requests, while Blackstone revealed that its private credit fund faced a surge in withdrawals in the first quarter.

The private credit alarm had already sounded, about three weeks ago, with the suspension of redemptions of some funds by Blue Owl (a company operating in the private market, i.e., financing companies with private capital raised from investors, many of them belonging to the tech sector because of their great growth potential). Blue Owl had been faced with requests from risk-averse investors to liquidate shares. Immediately, fears of a domino effect were raised, also due to the intertwining of the companies involved, as happened in 2008 with the subprime mortgages, when chain insolvencies spread.