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With sluggish traditional loan growth, major banks are increasing their lending to non-bank lenders through their trading units. This strategy has boosted fee income, and supports securitization, though smaller regional banks without trading arms risk falling behind this opportunity.
One area that is growing rapidly is lending to nonbanks, often through banks’ trading units. These can be loans to hedge funds, but also to credit funds or financial companies that are themselves making loans to businesses or consumers. The banks lend to the lenders, and sometimes also help them then sell those loans to the market in the form of a securitization. At Bank of America BAC 0.21%increase; green up pointing triangle, average loans in the first quarter were up 4% from a year earlier. Lending in its consumer and global banking units grew just 1%. But it reported a 19% jump in lending within its global markets business. Bank of America’s finance chief, Alastair Borthwick, described the growth in global markets as “very diversified,” and “across things like asset-backed and mortgage warehouse, and credit financing and subscription.”
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