JPMorgan is aiming to take the number one slot in the lucrative prime brokerage market in Europe by the end of next year, after launching a London-based operation only 12 months ago.
The US bank now has 30 European clients, with a further nine in the process of signing up, compared with its original target of 25 by the end of 2012, and a potential client base of about 60, Teresa Heitsenrether, global head of prime brokerage, told the Financial Times.
Ms Heitsenrether, who will relocate to New York soon, following the expansion of the European business, said a team is now building up Asian operations too, although so far it has focused on servicing the Asian needs of US and European fund clients.
Reliable data on market share among prime brokers is hard to pin down, but Goldman Sachs and Morgan Stanley have long been acknowledged as market leaders, though rivals have been eating away at their business, as clients sought to diversify following the onset of the financial crisis. In Europe, Credit Suisse has traditionally held a dominant position.
According to data compiled by Absolute Return, JPMorgan is now ranked fifth among European prime brokers. “We’re targeting the top one or two in the next 18 months,” Ms Heitsenrether said.
European clients of JPMorgan’s prime brokerage business say they have been drawn in by a mix of attractions. “They are fair and efficient with keen pricing, and they brought in three of the leading lights of the industry from Lehman Brothers,” said one big client.
Fund managers and bankers say the crisis created opportunities for other blue-chip banks with the resources to invest in the infrastructure required to participate in this arena, with those banks that have stronger credit ratings now reaping the benefit of being seen as a reliable counterparty.
JPMorgan gained a key foothold in the US prime brokerage operation with the acquisition of Bear Stearns in March 2008, though Bear Stearns had only a skeletal presence in Europe.
Prime brokerage is a big business for the investment banking industry, generating about $10bn in annual revenues.
Other banks that have expanded their presence in recent years include Citigroup, Deutsche Bank and Bank of America, which acquired Merrill Lynch’s prime brokerage business in their own 2008 tie-up.
JPMorgan will be the first of the big US banks to report second-quarter results on Friday, with analysts forecasting earnings of 76 cents a share, excluding accounting adjustments, according to a poll by Bloomberg. Investors are likely to focus on the bill for unwinding trading losses at the bank’s CIO treasury operation, which people close to the situation say will amount to about $5bn.