Ares Management Corp.’s chief executive officer said the banking crisis could play out for two more years, and that he expects opportunities to pick up more loan portfolios from struggling US regional banks.
The alternative asset manager may pursue additional deals similar to the one it reached in June with PacWest Bancorp to purchase $3.5 billion of asset-backed loans, CEO Michael Arougheti said on the firm’s second-quarter earnings call Tuesday.
“We’re still in the early stages of the transition in the banking market,” Arougheti said. The CEO expects more consolidation in the industry, he added. “With that consolidation, I think we’ll see secondary asset purchase opportunities and reduced competition in the primary market.”
Wall Street banks could also look to partner with credit firms such as Ares as they seek to manage new capital rules being imposed by US regulators, he said.
“The number of conversations that we’re having around these types of transactions has been increasing, and it’s showing up first and foremost in our alternative credit business,” Arougheti said.
Ares shares hit a record high of $103.03 at 2:18 p.m. in New York after the firm reported second-quarter results.
Banking Turmoil
Private equity firms are among the few investors with the capital and appetite necessary to buy assets originated by bigger banks. However, these firms have been frustrated in some of their attempts to take advantage of recent industry turmoil.
US regulators selected other banks to absorb the businesses of the failed lenders, including Silicon Valley Bank and Signature Bank. PacWest’s recent private equity-supported deal to merge with Banc of California may signal a shifting of the tides.
Ares has been touting its strengths in private credit as it pursues an ambitious fundraising drive across 30 commingled and perpetual funds, aiming to surpass last year’s $57 billion of cash raised.
The firm raised $17.4 billion in gross new capital commitments during the quarter, led by $12.8 billion across various strategies in its credit group, according to its second-quarter results. Assets under management were $377.6 billion as of June 30, a 13% increase from the prior year.
Ares reported second-quarter after-tax realized income of $292.2 million, a 25% increase from a year earlier. Fee-related earnings grew 21% to $266.1 million. Available capital was $95.8 billion, an increase of 5% from the prior year.