Prime brokerage: BNP Paribas buys BoA’s prime brokerage business
Widespread speculation about the likely purchaser of Bank of America’s equity prime brokerage business has come to an end.
Citadel, Jefferies, Barclays and JPMorgan were all rumoured over the course of the year to be interested parties. It was somewhat surprising, therefore, when the news broke that BNP Paribas had done a deal with BoA.
BNP announced in June that it would be buying the business at a cost believed to be $300 million. BoA had been looking for a buyer for six months, and analysts suggested that the lack of interest would drive down the price to half that value if markets continued to be shaky and balance sheets of potential bidders were tested.
It is an interesting move for BNP Paribas, which has no prime brokerage capabilities. But market participants say it makes good sense for the French bank. BNP’s global head of corporate and investment banking, Jacques d’Estais, says his firm, having weathered the financial crisis better than most, is now well positioned for such acquisitions.
The prime brokerage industry has become increasingly competitive over the past few years as investment banks have battled for a share of the highly profitable hedge fund business. "Hedge funds are high-frequency traders so bring in a lot in commissions, and are also willing to pay high money for good services.