Bear Stearns’ market share in the lucrative prime brokerage business has fallen sharply during the credit squeeze, an issue the bank is likely to address on Thursday as it announces what is expected to be its first ever quarterly loss. Prime brokerage –providing trading, lending and other services to high-paying hedge fund clients – is a critical business for Bear, which had long been a top three-player in the industry behind Goldman Sachs and Morgan Stanley. But Deutsche Bank has pushed into the number three spot. Bear’s decline in prime brokerage has accelerated amid mortgage-related troubles, including the collapse this year of two hedge funds run by its asset management division. The troubles have raised questions about its financial stability. According to one industry analysis, Goldman and Morgan Stanley each now generate about $2bn a year in revenue from prime brokerage, or 40% of the industry total, while Bear has about 5% of annual prime brokerage revenue.
