Barclays is gaining market share from its leading Wall Street competitors in the prime brokerage sector, a profitable investment banking arena where lenders are striving to support hedge funds engaged in a growing variety of intricate transactions. The UK-based bank has climbed to the fifth position in the prime broking revenue rankings for the period ending June, up from approximately seventh place five years ago, according to data obtained by Reuters from BCG Expand, a research firm. Another source, who preferred anonymity when discussing confidential client information, also verified Barclays' fifth-place standing. This milestone occurs as CEO C.S. Venkatakrishnan is set to announce the half-year financial results on August 1. The performance of Barclays' investment banking division is under intense scrutiny, particularly due to concerns that a strategy to transfer risk to other sectors might impair the unit's competitive edge. Mike Webb, the global head of liquid financing at Barclays, informed Reuters that his team is now a genuine 'disruptor' in the prime brokerage market. Webb highlighted that Barclays' competitive edge stems from its investment in a digital platform and a unified offering that integrates fixed income and equities products, a model that took eight years to refine. 'We consider ourselves the most integrated financing provider on Wall Street,' Webb stated. 'A large multi-strategy fund can engage with us for a comprehensive discussion about government bond repo, credit, futures... whereas at other banks, these are separate conversations for fixed income and equities,' Webb explained in an interview with Reuters. Prime brokerage, which involves banks providing hedge funds with services such as financing, securities lending, custody, and trade execution, generates approximately $20 billion annually in revenues for banks, as per Coalition Greenwich, a research firm. This figure has increased from $15 billion in 2020, despite the relatively mature nature of the industry with few new entrants. However, Webb noted that the demand for more sophisticated services is expanding the market. 'A prime business offers stable, repeatable, consistent, high-yielding, client-focused revenue and returns,' Webb commented. Barclays has expanded this business at a compound annual growth rate of 6% since 2016 and aims to maintain a high single-digit growth rate going forward. Mollie Devine, the head of markets competitor analytics at Coalition Greenwich, noted that prime brokerage is the most contested area in global banks' equities operations, especially following a decline in deal-making that has reduced advisory fees. 'Several banks have resolved various challenges and have identified prime as the area they wish to invest in within equities,' Devine remarked. Climbing higher in the rankings will be challenging for Barclays, as Goldman Sachs, JPMorgan, and Morgan Stanley lead the industry with nearly a 50% market share in prime and close to $1 trillion in client balances each, according to Amrit Shahani, a partner at BCG Expand. Other competitors such as Citigroup, Bank of America, and European banks like BNP Paribas, which acquired Deutsche Bank's prime brokerage business in 2019, are also aiming to expand their operations. Barclays' venture into prime services carries risks. Serving larger clients with more sophisticated trading needs does not guarantee profitability, as evidenced by Credit Suisse's recent issues with the failed private investment firm Archegos. The competition has become even fiercer since Credit Suisse's setback, according to George Evans, the president and co-founder of Convergence Inc. 'There are nearly 300 named prime brokers in SEC filings, which is the same number as about 12 years ago when we began,' Evans noted. Prime broking is appealing to banks because it offers a consistent and predictable revenue stream, unlike deal-making or trading, Evans added. Barclays, a client of Convergence, has expanded its business by meticulously selecting which funds to target, Evans concluded. The bank established 69 new fund relationships in the year leading up to March 2024, according to previously undisclosed data from Convergence, placing Barclays ninth in prime broker rankings by client count. According to Webb, the difference in ranking between revenue and client numbers is due to Barclays focusing on larger, more global funds with more complex needs. 'They are investing in the right market names,' Evans from Convergence stated.