Citigroup Inc (NYSE:C). is set to expand its footprint in the lucrative private credit domain with a new direct-lending initiative slated for early January. The move aims to bolster its leveraged finance operations and tap into the $1.6 trillion market.

The bank is actively considering forming partnerships with third-party funders to finance these loans, while carefully evaluating the use of its balance sheet for this venture. This strategic approach is designed to diversify Citigroup’s financial offerings, which include bonds, loans, and exclusive credit arrangements.

The initiative comes at a time when the bank is looking to capitalize on increased activity from private equity sales driven by investor repayment deadlines. By leveraging external funding partnerships, Citigroup aims to earn service fees, strengthen client relationships, and offer additional banking services such as liquidity management and risk mitigation.

Citigroup’s entry into direct lending is part of a broader trend among banks seeking to provide more comprehensive financial services and create new revenue streams in a competitive market. The bank’s venture into this sector reflects an innovative approach to meeting the evolving needs of borrowers and investors alike.