The top teir of Wall Street investment banks were fortunate to gain billions in client balances following Deutsche Bank’s wind-down of its once-lauded prime brokerage business. Although the numbers are not verified, word on the street says JPMorgan has been most sucessfull and has grabbed $40 billion in new assets from top-tier hedge funds including Renaissance Technologies and D.E. Shaw. Barclays looks to coming in second gaining roughly $20 billion in prime brokerage assets, CEO Jes Staley said in August on an earnings call with analysts. Morgan Stanley, Goldman Sachs, Bank of America, and Citigroup have all acquired billions from jettisoned Deutsche Bank balances as well.
“It’s part of the markets business where you earn revenue on Saturdays and Sundays and holidays. So it’s quite a business,” Staley said on that call. “And also, it reinforces the important relationships you have with principal actors in the capital markets. It is very profitable, and we will continue to pursue that business.”
French bank BNP Paribas reached a preliminary agreement to acquire Deutsche Bank’s prime brokerage technology, platform, and hundreds of staff, in a move that does not seem to be executed for DB’s clients. Hedge funds typically have more than one prime-brokerage provider, so many of the firms transferring assets away from Deutsche Bank will go to firms with already established relationships.
Deutsche Bank for years was known for having one of the strongest platforms for serving hedge funds, especially quant-focused shops. In addition to Renaissance and D.E. Shaw, AQR and Two Sigma were also top clients.
Prime services produced $18.3 billion in revenue in 2018 among Wall Street’s top banks, according to industry data consultant Coalition. Morgan Stanley has consistently ranked first in that business line, followed by JPMorgan and Goldman Sachs. Deutsche Bank didn’t crack the top-7, according to Coalition.