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(Bloomberg) -- While wealth management may be the business Credit Suisse Group AG favors growing these days, the Wall Street veteran who took over the bank’s equity trading unit has no intention of taking a back seat.

“We have more than sufficient resources to be a top-five equities player,” equities chief Mike Stewart said in his first interview since taking the job in June. “Right now, the business really is in execution mode. I’ve got my key people in every seat.”

Credit Suisse was the seventh-biggest equity trading house by revenue last year, and a jump into the top five would require it to boost its business by one third. Stewart didn’t give a timeframe for his ambition.

Stewart took up his job in the midst of some rocky years for the trading business. Credit Suisse lost almost a third of its trading market share from 2015 to 2017 after a push into Asia backfired, a team wagering on algorithms caused revenue to plunge and historically low volatility took a toll on earnings.

Since joining from cross-town rival UBS Group AG, Stewart has hired at least 18 senior investment bankers at the unit, which caters to institutional investors, hedge funds and insurance companies. Key hires include Mike Di Iorio, Roger Anerella, David Bleustein, Stuart McGuire, Michael Ebert, Gerry Milligan, Anthony Abenante and Scott Miller.

Stewart, who oversees the global stock-trading business outside of Asia, said he wants to reboot the bank’s business with hedge funds as he improves electronic trading systems and strengthens flows into Credit Suisse’s private-banking empire.

Credit Suisse took just over 7 percent of global equity trading revenues in 2017, while the fifth-biggest player, UBS, had 9.5 percent, according to data compiled by Bloomberg that rank firms within their peer group. Morgan Stanley placed first and had 21 percent of the business. Credit Suisse held the No. 3 spot in 2011.

The Swiss lender is in the final stretch of a three-year overhaul to focus more on wealth management. Part of the plan is to strengthen the collaboration between the trading unit and the private bank to offer more tailor-made products for the wealthy and provide financing solutions.

Credit Suisse last year set up a unit called International Trading Solutions, a joint venture between the Global Markets unit, international wealth management, led by Iqbal Khan, and the Swiss Universal Bank. Stewart said the joint venture is crucial to boost equity revenue going forward.

Pick and Choose

While the sudden return of volatility has prompted many banks to rediscover their passion for trading, Stewart said sorting the good performers from the bad has become more crucial.

“There has been a huge dispersion” in the performance of hedge funds, he said. “Anyone prudently running an equities business has got to be focused on the clients that are surviving and thriving in a challenging market. Hedge funds are critical and a high percentage of our business."

While Stewart will continue hiring for areas including derivatives -- a business that’s in demand as investors hunt for yield -- he says the trading business is finished with its overall revamp and the key executives are in place. Stewart said he doesn’t intend to exit any product lines, and that while the unit has been trimming some positions, there are no larger headcount reductions planned for 2018.

Prime Services

Stewart’s responsibilities include the prime services operations, which Thiam continued to shrink after taking the helm of the bank in 2015. The business of settling trades and lending to hedge funds has come under pressure due to stricter capital rules.

“We want to refocus and lean into prime brokerage, which has been a historical strength," Stewart said. “However, we did feel it was over-resourced from a personnel standpoint."

The bank has made some cuts to its brokerage business in recent weeks, with Stewart saying they were small compared to the number of new hires. Among people who left were Michael Wingertzahn, Gardy Berthoumiex and Indrajit Bardhan, according to a person familiar with the matter. They couldn’t be reached for comment and Credit Suisse declined to comment. In total, a few dozen employees have left the trading unit recently, two people familiar with the matter said without being more specific.

Up and Down

Equity hedge funds declined in February but returned 1.4 percent this year, according to Hedge Fund Research data from early March. In 2017, equity-focused funds had their best start to the year since 2013 as long-and-short equity managers benefited from surging markets in Europe, the U.S. and emerging markets.

Stewart may need some time to prove that his measures are bearing fruit. Equities revenue at the Global Markets division slumped by 27 percent in the fourth quarter from a year earlier, the seventh annual decline in the last eight quarters, according to Credit Suisse filings. Revenue for 2017 was down 19 percent from a year earlier at the unit, which excludes Asia.

Credit Suisse sounded bullish about its trading business at the start of the year. However Thiam was more cautious in March, saying business in the quarter was very “confused” and that profitability won’t return to the levels seen in the first months of 2018.

Last month, Credit Suisse said in a presentation that revenue in dollar terms was similar so far in 2018 to what the trading unit posted in the same period last year. The unit ended up generating about 1.6 billion francs ($1.69 billion) of revenue for the entire first quarter of 2017.

Volatility returned to markets in February of this year after a period of unusual calm. U.S. stocks had their worst single-day plunge in almost seven years and 10-year Treasury yields reached their highest level in more than four years.

“Obviously volatility brings opportunity and over time we will monetize it,” Stewart said.

(Updates to provide more context on comments made by CEO about volatility from third to last paragraph.)

To contact the reporter on this story: Jan-Henrik Förster in Zurich at jforster20@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen, Paul Armstrong

©2018 Bloomberg L.P.

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