JPMorgan Chase, Wells Fargo, Citigroup boost CLO investments in Q1

The three largest bank holders of CLO securities significantly increased their investments in global deals during the first quarter. But their combined market share shrank as more institutions continued to raise their profiles as buyers in the $1.2 trillion U.S. leveraged loan segment.

JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. each added between $3.25 billion and $4.68 billion in CLO holdings from January through March, according to bank regulatory data filed with the Federal Reserve System.

New-issue CLO volume in the first quarter totaled a record-breaking $39.3 billion, according to LCD data, and through June 14, year-to-date volume of $71.2 billion is running at the fastest pace on record.

JPMorgan's portfolio increased by $3.25 billion in the first quarter to $32.58 billion as of March 31 to maintain its status as the largest U.S. bank investor in CLO holdings. This is still below the $33.97 billion total seen at the end of the first quarter of 2020.

Wells Fargo increased its share of CLOs in the first quarter by $3.61 billion, to $28.88 billion, maintaining its second-place position in CLO holdings. Wells Fargo's first-quarter tally was 17.4% above the year-ago total.

Citigroup also sharply increased its CLO securities as reported in new Y-9C filing disclosures to the Fed published last month. The bank grew its CLO holdings by 21.9% to $26.05 billion quarter over quarter.

The three banks combined hold more than 78% of the $111.65 billion in total CLO holdings reported by all U.S. banks. The total share, however, was down from the 81% held by the trio at the end of the first quarter of 2020.

Bank of New York Mellon Corp. has added $656.0 million in new CLO securities since the end of the first quarter of 2020 to become the fourth-highest CLO holder at $4.75 billion, ahead of Stifel Financial Corp.s $4.72 billion. Stifel maintained the highest percentage of CLO securities-to-total assets, with 16.8% as of March 31.

Furthermore, State Street Corp. has added more than half of its $4.69 billion in CLO securities within the past year, including $769.0 million during the first quarter to rank sixth among all U.S. banks.

TD Group US Holdings LLC, on the other hand, was the only other institution with over $4 billion in CLO holdings. The bank increased its CLO holdings by $874.4 million in the first quarter.

Other holdings of note:

* Bank of America Corp. divested over 90% of its CLO securities to a total of just $78.0 million during the last year, the largest year-over-year percentage decline among all U.S. banks.

* Another firm reducing a large share of its CLO securities was Ameriprise Financial Inc., which held only $1.1 million in CLO securities at the end of the first quarter, compared to $3.4 million a year ago.

* Western Alliance Bancorp. reported the largest percentage growth of 567.7% in CLO holdings during the first quarter to a total of $980.7 million.