Blackstone Wants to Partner with Regional Banks in Loan Originations


Blackstone wants to give regional banks more lending power ahead of a looming credit crunch.

Jon Gray, president of the private equity giant, told the Financial Times in an interview published Thursday (May 11) that his firm was in discussions with large regional banks in the U.S.

“The discussions we are having is to potentially partner with a regional bank,” Gray said, adding that the lenders in question had between $100 billion and $250 billion in assets but declined to mention specific banks.

According to the report, the partnerships would involve banks originating loans that Blackstone would then pass onto its insurance clients, which would then pay a fee to the investment firm for moving the assets their way.

Gray said in the FT interview that regional banks were still in the best position to determine whether to lend to commercial and real estate customers, arguing they had “powerful origination capabilities and relationships.”

But he added operations like Blackstone could be a “valuable partner” by helping lessen some of the risk once a loan has been secured.

“Rather than putting all [of the risk] on its balance sheet, maybe they keep 50 cents [on the dollar], and put 50 cents with us,” said Gray.

News of the talks come as private capital firms like Blackstone are seeking ways to boost their credit exposure following the recent regional banking crisis, the report notes.

Earlier this week, the Federal Reserve warned that the failure of lenders such as Silicon Valley Bank and First Republic Bank had driven a “sharp contraction” in credit that threatened to “drive up the cost of funding for businesses and households.”

That’s according to the central bank’s “April 2023 Senior Loan Officer Opinion Survey on Bank Lending Practices,” published Monday (May 8).

As to why banks anticipate lending to contract, the report said these lenders expect “deterioration in the credit quality of their loan portfolios and in customers’ collateral values, a reduction in risk tolerance and concerns about bank funding costs.”

Other concerns include the bank’s liquidity position and deposit outflows, all adding up to a season of tighter lending standards for the remainder of the year.

Aside from tightening their standards for loans in the first quarter, banks — for the most part — also saw lower demand for loans from businesses and consumers, the Fed report said.