Apollo's Profits Up 26%, Misses by 7 Cents, Aims High in Credit

Key Takeaway

• Apollo Global Management Inc. reports a 26% increase in adjusted net income to $1.06 billion, missing analysts' expectations by 7 cents.
• The firm aims to originate $200-$250 billion of private credit annually within five years, with assets under management growing 12% to $671 billion.
• Competitive private credit market highlighted by a €1.5 billion loan for SumUp Payments Ltd., involving major firms like Apollo and BlackRock.

Apollo's Q1 Performance

Apollo Global Management Inc. reported a 26% increase in adjusted net income to $1.06 billion, or $1.72 a share, for the first quarter. Despite this growth, the figure fell short of analysts' expectations by 7 cents, according to a Bloomberg survey. The firm's Athene insurance arm saw a reduction in exposure to floating rate debt, and alternative investments generated lighter returns, impacting the overall profit. However, spread-related earnings from Athene rose 19% to $817 million, indicating a solid performance in profitability metrics.

Fee-related earnings experienced a 16% increase to $462 million, driven by an uptick in management fees from Athene clients, third-party fundraising, and capital invested across Apollo’s yield and hybrid strategies. CEO Marc Rowan expressed confidence in meeting the financial targets for the year, highlighting the firm's momentum. Apollo's shares have seen a 16% increase this year, outperforming its major publicly traded US peers.

Strategic Growth and Asset Management

Apollo has set ambitious growth targets, aiming to originate $200 billion to $250 billion of private credit annually within five years, a significant increase from the $100 billion at the end of the previous year. This strategic focus on private credit is part of Apollo's broader growth plan. The firm's assets under management grew by 12% year-over-year to $671 billion, with fee-generating assets reaching $506 billion. Despite a slow income from selling private equity assets, which stood at $21 million for the quarter, Apollo's credit, equity, and hybrid assets saw substantial growth.

Private Credit Market Dynamics

The private credit sector is witnessing a surge in activity, with Goldman Sachs Asset Management leading a €1.5 billion loan for SumUp Payments Ltd., involving major firms like BlackRock, Apollo, Oaktree Capital Management, and Vista Credit Partners. This deal, priced at 650 basis points over the benchmark rate, underscores the competitive nature of private credit markets and the strategic financing moves by technology companies like SumUp for global expansion.

The lending landscape is becoming increasingly competitive, with traditional banks and private credit firms vying for lucrative deals. JPMorgan Chase & Co. and Goldman Sachs Group Inc. are among those competing for a $1.05 billion financing for ASC Engineered Solutions, highlighting the ongoing battle for dominance in the lending space. Additionally, Sound Inpatient Physicians Inc. is negotiating with creditors to extend loan maturities, reflecting the financial restructuring efforts and challenges companies face in the current market.

Management Quotes

• Marc Rowan, CEO of Apollo Global Management Inc.:

  "With visible momentum across the platform, we’re confident in our ability to deliver on our financial targets for the year."