JPMorgan Advances Prime Brokerage

JPMorgan Chase & Co. (JPM) on Wednesday said a team would now be dedicated for delivering its integrated prime brokerage and custody platform to clients. The team, Prime-Custody Solutions Group, will serve hedge funds and asset managers who look for a combination of prime brokerage capabilities and securities services.

Bear Stearns was one of the only prime brokers that had offered custody benefits to clients since 1997. The prime brokerage flourished after it was acquired by JPMorgan. Its Treasury & Securities Services division now manages $13.7 trillion in assets under custody and is the industry leader in prime brokerage and custody businesses.

The new development will further expand its product offering and deliver additional benefits to clients in a more efficient manner. As a result, it will be able to capture extended market share during the ongoing market challenges which have underscored the importance of partnering with a prime brokerage that can safeguard assets in a separate depository.

We think this is the right time to launch the Prime-Custody Solutions Group while the hedge funds are launching long-only funds and seeking structures that allow them to house certain assets with custodians.

Investors voted JPMorgan to receive 75 “Best in Class” awards and nine “Top Ratings” in Global Custodian’s 2009 Prime Brokerage Survey. During the second quarter, the company also repaid the full $25 billion in preferred capital received as part of the Troubled Asset Relief Program (TARP).

JPMorgan reported disappointing second-quarter results, with a 47.2% year-over-year drop in earnings per share. Although results benefited from a record performance by the investment bank and solid performances in other segments, Consumer Lending and Card Services deteriorated due to continued high levels of credit costs.

We expect continued synergies from the company’s diversification and strong capital position, but increasing provisions and worsening credit quality will be a drag on upcoming results.

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