Why is prime broking hiring still so incredibly hot?

All else is going to the Chihuahuas, but banks are still hiring for their prime broking businesses. Bank of America's putative redundancies have increased again to 40,000 (up from 30,000 last Friday), but it's just hired a new global head of capital introductions. HSBC has hired the ex-Citadel COO as head of prime services, Citi's building its prime broking business in Asia and banks like JPMorgan have been on a European prime broking push this year.

In an environment where all else is moribund, what's fuelling this activity?

The simple answer is flow. Now that prop trading is out and market-making is in, prime broking's ability to deliver hedge fund clients is more important than ever before.

"A hedge fund that uses a bank as its prime broker will be tied into using that bank for its execution and other needs," says Jesper Bang, the former of head of prime broking at Dresdner, who now runs a hedge fund in Switzerland. "Prime broking is all about getting a bigger share of the client wallet. Banks are fighting to keep revenues. We know that hedge funds which are prime broking clients will do a lot more business with the bank than hedge funds that aren't."

Ralph Silva, an analyst with SRN, points out that prime brokerage businesses are actually making money and are seen as a growth area. "Banks expect there to be more business in the hedge fund environment in the next three to five years. This is an area that's still making money - not least because hedge funds' trading volumes are high in difficult markets."

However, the notion that prime broking is hiring heavily may be wrong. It's hot compared to other business areas, but other areas are very cold. Jon Regan at recruiters Riversdale Consulting says equity prime broking businesses are full and have possibly over-hired (earlier this year Nomura scaled back its prime broking business in London) and that most of the hiring next year will be for OTC clearing initiatives in the prime broking area - once regulators have finalized implementation dates.

Andrew Morland, a prime broking-focused headhunter at Pelham International confirms that there is hiring, but not a lot and that's being constrained by the wider gloom: "Prime broking businesses are up and want to hire, but they can't when the rest of the bank is losing money."