Citi has struck a €15B partnership with BlackRock to provide personal loans across Europe and the Middle East

BlackRock's private lending arm Citigroup and HPS Investment Partners have launched a €15 billion private capital program targeting corporate borrowers across Europe, the Middle East and Africa.

The structure is simple: CT originates the deals, HPS puts up most of the capital, and the credit risk shifts CT's balance sheet to HPS. For HPS, which manages 381B of assets under management, it is a deal flow line for one of the world's largest banks.

How the partnership actually works

The program will operate for an initial period of five years and will focus on sub-investment-grade debt. Target borrowers include corporate entities and sponsor-backed companies across continental Europe and the UK. The program is also set to expand to the Middle East.

Here the role of CT as an initiator is crucial. The bank maintains customer relationships, earns payments and remains relevant in the credit market without burdening itself with risky assets. HPS, meanwhile, gets a CT deal of source infrastructure.

Why banks and personal loans are converging.

After the 2008 financial crisis, banks faced strict capital requirements. It became expensive to have risky loans on their books. Private credit unions, unencumbered by those laws, stepped in to fill the gap.

BlackRock's acquisition of HPS only accelerated this trend. With $381B in AUM, HPS has the power to absorb enormous amounts of credit risk, the kind Citi needs to operate a 15B program.

What does this mean for investors and the broader market?

For institutional investors who allocate private loans through managers like HPS, this type of bank partnership offers a more diversified line of deals. CT Origin's network spans dozens of countries and thousands of corporate connections.

The deal also underlines how competitive the European private credit market is. Sub-investment grade corporate borrowers in the EMEA region now have another well-capitalized loan option. More competition among lenders generally means better terms for borrowers, which can squeeze yields over time.