HSBC has announced a $4bn investment into its private credit funds, part of a broader push by banks to tap into the booming $2tn global private credit market.

The capital will be channelled through HSBC Asset Management’s alternative credit funds, with the aim of attracting external investors and scaling the platform to $50bn within five years.

HSBC’s private credit division, launched in 2018, has deployed $7bn across 150 transactions but remains a smaller player compared to established names like Blackstone and Ares. This latest move is designed to strengthen its competitive position, particularly as banks seek to diversify income streams amid pressure on profits from traditional lending.

“It’s an arms race,” said Nicolas Moreau, CEO of HSBC Asset Management, who emphasised that the bank’s backing will help the unit attract fresh capital. HSBC’s private credit strategy will focus on direct lending opportunities in the UK and Asia.

HSBC joins other global banks expanding into private credit, including Citi and UBS, which have partnered with Apollo and General Atlantic, respectively. Deutsche Bank has also launched its own platform.

CEO Georges Elhedery is steering HSBC’s strategy towards higher-returning business lines like private credit, moving away from the bank’s traditional reliance on lower-margin lending activities.

The capital injection highlights private credit’s growing appeal to banks seeking higher yields, while the market continues to expand as an alternative source of financing for corporates beyond traditional banking channels.