Credit Suisse Equities Trading Chief Plots Return to World Top 5 - Bloomberg

Credit Suisse Equities Trading Chief Plots Return to World Top 5
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April 3, 2018, 6:09 PM GMT+10
UBS veteran Mike Stewart says management revamp is complete
Focus on hedge fund business, derivatives, trading systems

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.”

Stewart took up his job in the midst of some rocky years for the trading business. The group lost almost one-third of its market share from 2015 to 2017 after a push into Asia backfired, a team wagering on algorithms caused revenue to plunge and a new unit set up for the most complex products frustrated traders. The bank was the seventh-biggest globally by revenue among equity-trading houses, as of 2017.

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 at the unit include Mike Di Iorio, Roger Anerella, David Bleustein, Stuart McGuire, Gerry Milligan and Scott Miller.

Stewart 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. In 2011, the trading unit held the No. 3 spot globally, according to data compiled by Bloomberg.

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 is becoming more important.

“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 a no larger headcount reductions planned for 2018.

Prime Services
Stewart’s responsibilities include the prime services operations, which Thiam shrank 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."

Brokerage Cuts

The bank has made some cuts to its brokerage business in recent weeks, with Stewart saying they were small compared to 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.

Equity hedge funds declined in February but returned 1.4 percent so far 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 revenues slumped 27 percent in the fourth quarter and 19 percent for the year in the bank’s Global Markets division, excluding Asia.

Credit Suisse sounded bullish about its trading business at the start of the year. However Thiam was more cautious 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.

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