EXECUTIVE SUMMARY Markets rebounded sharply following the November and December 2023 Fed meetings, as the risk of recession receded and rate cuts came into view. Loan and bond issuance set records through the 昀椀rst two months of the year, with credit spreads at their tightest levels since the onset of the pandemic. Much of this activity involved bank-arranged re昀椀nancing of loans originated during the period when private credit’s market share increased substantially relative to broadly syndicated loans. Bank disintermediation continues to gather pace, but new competitive fault lines have emerged. It is one thing to disintermediate loans from bank balance sheets. It’s quite another to disintermediate the banks themselves from their most prized clients and customers. As bank balance sheets become more constrained due to regulation and other factors, their lending decisions will become even more sensitized to relationship considerations, especially for large banks who derive a disproportionate share of their operating earnings from noninterest income. While this may constrain the growth (or expected returns) of direct lenders competing directly with banks for larger borrowers, it should create more opportunities virtually everywhere else, as private funds partner with banks to assume more of their assets in some areas and displace them entirely in many others. 2