Private credit jitters hit bank stocks
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Banks had a bad day on Thursday. One of the main reasons: private credit.
Driving the news: After a report that BlackRock slashed a private loan in its portfolio to zero, bank stocks fell, as investors get increasingly twitchy over exposure to the murky private credit business. (Those cockroaches that JPMorgan Chase CEO Jamie Dimon had warned about.)
By the numbers: The KBW Nasdaq bank index, which tracks around 20 major bank stocks, is down 8.2% so far this month.
How it works: The big banks lend money to private creditors like BlackRock and Apollo. Those companies then lend money to smaller firms, and a lot of those businesses were in the software sector.
- Software companies are having a bad time lately. Saaspocalypse anyone?
The latest: BlackRock marked to zero a $25 million loan to Infinite Commerce Holdings, an Amazon aggregator, which buys and operates third-party sellers on the site, Bloomberg reported Thursday.
Reality check: This is a tiny write-off for a financial behemoth with more than $14 trillion in assets under management.
The bottom line: Still, it's unnerving for investors to see valuations suddenly melt to nothing.
- And speaking from personal experience, when you see a cockroach, you freak out and you stomp.
Go deeper: Private credit is probably not the place for democratization
