Wall Street’s largest investment banks are enjoying record revenues from their prime brokerage businesses as elevated market volatility, strong hedge fund performance and growing demand for financing continue to fuel client activity, according to a report by Reuters.
Second-quarter earnings from Goldman Sachs, JPMorgan Chase, Morgan Stanley and Citi showed prime brokerage remained one of the strongest-performing businesses across their trading divisions, benefiting from increased hedge fund leverage, higher client balances and expanding activity in Asia.
Goldman Sachs reported a record quarter for its prime brokerage franchise, with equity financing revenue jumping 91% year-on-year. Across its fixed income, currencies, commodities and equities businesses, financing revenues rose 62% to $4.5bn, representing more than one-third of total revenues in those divisions.
Chief executive David Solomon said client activity was particularly strong in Asia, where artificial intelligence investment and capital raising drove increased financing demand. Average prime brokerage balances reached a new record during the quarter.
Chief financial officer Denis Coleman said the bank’s decision to expand its prime brokerage presence in Asia earlier this year had already begun to deliver results. He added that client demand for financing continued to exceed the bank’s willingness to deploy balance sheet capacity, reflecting its focus on balancing growth with risk management.
JPMorgan Chase also posted strong results, with markets revenue rising 35% in the second quarter. Its equities division, which includes prime brokerage services, generated $6bn of revenue, an 86% increase from a year earlier.
The bank attributed the performance to strong client trading activity across both derivatives and cash equities, alongside higher prime brokerage balances as hedge fund clients remained highly active.
Morgan Stanley likewise reported robust growth in its prime brokerage operation, citing higher average client balances and continued expansion in Asia. The bank also benefited from financing activity linked to large capital markets transactions, including the recent secondary share sale by SpaceX, which attracted significant demand from institutional investors and hedge funds.
At Citi, markets revenues increased 17% during the quarter, while equities revenues climbed approximately 45%. Prime brokerage balances rose nearly 60% as the bank attracted both new and existing hedge fund clients amid rising market valuations.
