* Goldman's financing revenue rose 62% to $4.5 billion

* JPMorgan's ( JPM ) equity markets revenue surged 86% to $6 billion

in June quarter

* Citi said prime balances rose nearly 60% on demand from

new and existing customers

By Anirban Sen

NEW YORK, July 15 (Reuters) - Wall Street's prime brokerage

engine is humming and delivering handsome gains for the largest

U.S. banks.

As the largest U.S. banks reported blockbuster profits this

week, financiers earned bumper fees from lending to the world's

most prominent multi-strategy hedge funds that rode on market

volatility to produce big returns during the first half of the

year.

Wall Street powerhouse Goldman Sachs ( GS ) witnessed a

record quarter for its prime business. Equity financing revenue

skyrocketed 91% from a year earlier, driven by strong growth in

Asia, resulting in record average prime balances for the bank.

Across its fixed income, currencies, and commodities (FICC) &

equities businesses, financing revenues jumped 62% to $4.5

billion, accounting for about 37% of total FICC and equity

revenues for the bank.

"Client activity was particularly strong in Asia, driven in

part by robust AI capital formation and investment. This

strength also extended into financing where we generated another

quarter of record revenues as we deployed our balance sheet to

support clients with average prime balances rising to another

record," said Goldman CEO David Solomon.

Goldman CFO Denis Coleman said the bank identified Asia as a

strategic growth area for its prime business.

"We made the decision to start ramping that up in the first

quarter, which gave rise to questions as to (whether) we could

sustain that investment," Coleman told analysts on Tuesday. "We

have revenues that are resulting from those investments that we

made, and we're entering the second half with a capital cushion

that's even larger."

"In the case of prime ... there continues to be far more

demand across the client segment than we're willing to engage

when we sort of balance our objectives of serving our clients,

driving market share but also being balanced, diversified and

focusing on risk management," Coleman added.

At JPMorgan Chase ( JPM ), revenue from its markets business

surged 35% during the June quarter, driven primarily by the

equity markets unit - which houses the prime brokerage business

- that raked in $6 billion, up 86% from the same period last

year.

"Flows were strong and trading was favorable in both

derivatives and cash - and prime benefited from higher client

activity and balances," said Jeremy Barnum, chief financial

officer at JPMorgan ( JPM ), on a post-earnings conference call with

analysts.

BLOCKBUSTER BUSINESS

Over the past few quarters, Wall Street's biggest prime

brokerages have been buoyed by surging valuations, tailwinds

from AI demand, growth in regions like Asia, and a spate of

record-breaking equity issuances.

For instance, SpaceX's recent $86 billion share sale

triggered big demand from large institutional investors and

hedge funds that scrambled to lock in sizable allocations.

Morgan Stanley ( MS ), which alongside Goldman led the SpaceX

offering, also raked in big gains from its prime brokerage unit,

driven by higher average customer balances and robust growth in

Asia, the bank said on Wednesday.

"I can tell you that there is a lot of demand for that

capital inside the four walls of our global firm," said Morgan

Stanley ( MS ) CEO Ted Pick. "In macro, it's certainly coming from our

equities client base in prime brokerage and in derivatives."

At Citi, revenues from the bank's markets business were up

17%, helping it generate more than $7 billion. Citi's equities

business raked in gains of about 45%, with prime balances up

nearly 60%, buoyed by increased demand from new and existing

customers, and higher market valuations.