JPMorgan Chase is expanding its prime brokerage services - 3 years after gaining a foothold in the sector with its acquisition of Bear Stearns - by launching full prime brokerage service for hedge fund clients in Europe.  Prime brokerage, which includes securities lending, leveraged trade executions and cash management services, is a lucrative business for big banks and allows them to sell other services to the large funds.   The launch takes place Wednesday, 6/29. 

Clearing trades and lending money to big hedge funds has been a top priority at JPMorgan in a post-crisis landscape where fund managers have been forced to diversify their prime broking relationships.  The move cuts into Goldman Sachs and Morgan Stanley, and, in Europe, Credit Suisse, which have dominated this area.  Fund managers say the crisis created opportunities for other blue-chip banks with the resources to invest in the infrastructure required to participate in this arena.

The move into Europe is one half of JPMorgan's strategy - it also sees Asia as a core strategic objective in 2011.  Jes Staley, head of JPMorgan’s investment bank, said “The right moment came in 2008, when we acquired the platform, and we haven’t stopped investing in it.”

Prime Brokerage - A Cash Cow.  In preparing for the launch, JPMorgan added about a dozen senior people to the global business over the past year.  Before the establishment of a separate UK legal entity, however, the bank was blocked from offering the full range of clearing, settlement, lending and financing services demanded by clients.  JPMorgan, which does business with hedge fund managers that oversee 70% of assets under management globally, is not alone in scaling up its ambitions in the prime brokerage market.  Citigroup, Deutsche Bank and Bank of America, which acquired Merrill Lynch’s prime brokerage business, are also ramping up their operations.   [Financial Times, 6/21/11]