According to the "Zhī Tōng Cái Jīng" app, Citigroup (C.US) and Apollo Global Management (APO.US) will collaborate in the rapidly growing private crediting market, agreeing to jointly complete transactions worth $25 billion in the next five years.

It has been revealed that these two heavyweight institutions on Wall Street have reached an exclusive cooperation agreement to arrange financing for corporate and private equity clients. The Mubadala Investment Company and Apollo's insurance subsidiary Athene will also be involved in the joint venture, which will initially focus on the North American market.

Apollo Global Management Co-President Jim Zelter described the relationship between private capital providers and banks in an interview, stating: "This is the direction in which the industry is heading." "Citigroup has evolved from a very active M&A banker with some tools to a banker with a full toolbox."

Citigroup and Apollo have the option to expand this arrangement beyond the initial $25 billion target and extend it to other regions. Zelter mentioned that the plan aims to launch $5 billion in bonds trades in the first year.

These two companies have set one of the most ambitious goals to date, marking a series of collaborations between banks and private credit management firms that are reshaping Wall Street and the capital markets.

In terms of providing financing to businesses, these two industries have long been seen as competitors, but are now increasingly converging. Banks are finding ways to maintain their fees without weighing down their balance sheets as they grapple with regulatory and capital requirements. Meanwhile, private credit management companies, after raising record funds, are under pressure to find new investment channels.

Citigroup will rely on its expertise in investment banking to find new debt trades among clients and will receive fees for initiating these trades. Apollo and its partners will provide the funding. This issuance will be the third measure of the bank's debt capital markets strategy, supplementing its existing arrangements of loans and bond issuance in the public markets.

Citigroup's debt capital markets head, Richard Zogheb, stated in an interview: "We lost a lot of transactions in private crediting." "The good news for us now is that we can maintain our current position and provide solutions."

Citigroup is following competitors in making a big push into the $1.7 trillion private crediting industry, but each bank has taken a different strategy. JPMorgan has allocated at least $10 billion from its own balance sheet for direct loans. Goldman Sachs has been raising third-party funds for private-initiated trades through its asset management department for years. Wells Fargo & Co. collaborated with Centerbridge Partners last year to launch a $5 billion fund.

Banks and asset management companies are closely connected.

The transactions between Citigroup and Apollo are bringing the two long-entangled companies on Wall Street closer. Zelter joined Apollo in 2006 after working at Citigroup for over 10 years, serving as Chief Investment Officer for an investment private asset department. Before that, he was responsible for the bank's global high yield and leveraged financing business. Citigroup is a frequent underwriter of debt trades for Apollo's private equity business.

Citigroup's Vis Raghavan is working hard to turn around the performance of his department. After leading the global investment banking business at JPMorgan, Raghavan joined Citigroup this year to oversee all the bank's traders. Data shows that the company has risen to become the second largest underwriter of U.S. investment-grade bonds this year, behind only JPMorgan. However, its performance in high yield bonds and leveraged loans has slightly declined.

Apollo is one of the largest private capital providers, with assets under management close to $700 billion as of the end of the second quarter. More than $500 billion of this is related to crediting business.

Apollo's CEO Marc Rowan's goal is a private crediting asset market worth over $40 trillion, including providing loans to private equity trades and large corporations, financing a wide range of asset categories from mortgages to music royalties.