Bear's Pain Was Goldman's Gain

Goldman Sachs'(GS - Cramer's Take - Stockpickr) strong second-quarter growth in its prime brokerage business may suggest that JPMorgan Chase(JPM - Cramer's Take - Stockpickr) is getting less than it expected out of its recently closed deal for Bear Stearns.

Amid declining profits and a difficult landscape for investment banks, Goldman's prime brokerage business was a rare growth area for the firm in its second-quarter results announced last week. Goldman characterizes this business as "securities services" and reported that the number increased 30% over last year's second quarter. The investment bank logged net revenues from the unit of $985 million, a whopping 36% increase sequentially.

Goldman would not comment on its prime brokerage business beyond what it said in its earnings release, but it seems clear the firm benefited from the collapse of Bear Stearns. A consultant that works with hedge funds said Goldman was well positioned to take advantage of Bear's spiral that eventually led to its sale to JPMorgan in March. The consultant said his clients immediately called their prime brokers to check on their financial stability and seek alternative places to park their money.

"They asked, 'What steps have you taken? Can this happen here? And can you help me move my money away from Bear?'" the consultant says.

While it is difficult to get firm numbers, Goldman and Morgan Stanley(MS - Cramer's Take - Stockpickr) are believed to command the top market share in the prime brokerage business, according to Celent Research. Goldman contends it is the leader in volume for prime brokerage. Mary Claire Delaney, a spokeswoman for Morgan Stanley, says the company had "strong results in prime broker for [the second quarter]," but did not offer specifics.