The “Smart Money” had a banner year in 2025, and Wall Street’s biggest banks are cashing the checks.
As major banks report Q4 earnings, a clear theme has emerged: Prime Brokerage is the MVP. With multi-strategy hedge funds navigating volatility and leveraging up to chase AI-driven returns, the financing engines at JPMorgan, Goldman Sachs, and Morgan Stanley are running hotter than ever.
📊 THE SCORECARD:
- JPMorgan: Equity markets revenue surged 40% to $2.9 billion, explicitly driven by Prime lending.
- Citi: Prime balances skyrocketed >50%.
- Bank of America: Equities revenue jumped 23%.
- Goldman & Morgan Stanley: Both reported record/strong equity net revenues, lifted by higher client balances and financing fees.
🔄 THE LEVERAGE LOOP: Why the boom? It’s a volume game.
- Record Leverage: Data shows leverage used by traditional L/S funds is near an all-time high.
- The “Goldilocks” Volatility: JPM’s Head of Equities, Rachid Alaoui, noted the perfect storm: “A favorable trading environment… allowed clients to add some leverage in prime without any credit or counterparty issues.”
- The Clients: Multi-manager giants like D.E. Shaw, Balyasny, and Point72 posted double-digit gains, fueling the demand for more financing.
⚔️ THE MARKET SHARE WAR: The ghost of Credit Suisse still lingers—in a good way. Since the Swiss lender’s exit (post-Archegos), US banks have been in a ruthless “land grab” for those stranded prime balances. The 2025 numbers confirm that the top US banks have successfully absorbed that market share, turning Prime into a critical, high-return pillar of their spread businesses.
💡 ANALYST TAKEAWAY: This earnings season proves that Prime Brokerage is no longer just a “utility” service; it is a primary growth driver. The correlation is simple: When Multi-Strats win (Stock Pickers +16.24% in 2025), the Banks win. As long as volatility remains “tradeable” (not systemic), the leverage machine will keep printing fees in 2026.
👇 Prime Brokers & PMs: With leverage at record highs, are we seeing a structural shift in risk appetite, or just a cyclical peak?