The first quarter of 2026 was a good time to work in the prime broking division of an investment bank. Bank of America, Citi, Goldman Sachs, JPMorgan and Morgan Stanley released Q1 results this week. Their soaring revenues in equities sales and trading were widely credited to soaring activity in prime.
Prime broking businesses in banks work with hedge funds and with other large institutional investors. As Mithra Warrier, a former Citi prime broking MD, explained two years ago, prime broking teams are “holistically” involved with their hedge fund clients: they lend them money for leveraged bets; they lend them securities for short bets; they help them with clearing trades; they help them with custody; they even help them raise money in the first place.
As hedge funds have grown, so have the bucks to be made from prime broking. The chart below, taken from this week’s report from S&P Global, shows revenues made over the past five years from banks’ markets financing businesses, which sit within prime. 2025 was exceptional.
Source: Standard & Poor’s
2026 may be more exceptional still. Speaking this week, Morgan Stanley CFO Sharon Yeshaya said the bank’s growing prime balances supported its 25% year-on-year increase in equities sales and trading revenues, “particularly in Asia.” Goldman Sachs CFO Denis Coleman said the firm “significantly expanded” its own equities financing activities in Asia. Citi CEO Jane Fraser said the bank increased its prime balances by 50%.
Growth in prime reflects investment in the area, particularly in the Asian market. Citi hired Jignesh Patel from Millennium last August as its APAC prime finance head, for example. It also hired Jillian Snyder from BofA as head of capital introductions in New York in December.
But, prime isn’t a one way bet. When it goes wrong, it can go very wrong, as evinced by Credit Suisse’s $5.5bn of prime broking losses relating to the collapse of hedge fund Archegos Capital Management in 2021. A subsequent report blamed “incompetence” in the Swiss bank’s prime broking team, following a weakening of risk management expertise in the area.
As banks double down on prime broking revenues, they need to hope their risk management processes are sound. The charts below, created last year by Matt King, Citi’s former head of credit strategy at Sartori Insights, highlight the huge growth in hedge fund leverage since 2020, much of it driven by prime services teams. S&P Global notes that the average hedge fund is now 12X levered, versus 5X for much of the 2010s. This creates “significant aggregate risk across the balance sheet,” S&P observes.
All will be well, unless a major fund blows up. At that point, the risk from prime businesses will become amply apparent. For the moment at least, prime services professionals might want to make the most of their moment in the sun.
Source: Sartori Insights
Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, Whatsapp or voicemail). Telegram: @SarahButcher. Signal: sarahbutcher.22 Click here to fill in our anonymous form, or email editortips@efinancialcareers.com.
Bear with us if you leave a comment at the bottom of this article: comments are moderated intermittently by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. You must take sole responsibility for comments you post on this site. We will take reasonable steps to weed out anything that we consider to be offensive or inappropriate.