Citi, JPMorgan target market-share gains in equities

By Lionel Laurent

LONDON (Reuters) – U.S. banks Citigroup and JPMorgan Chase expect to gain market share in equities this year, executives told Reuters, pointing to technology investment and new hires as financial-market trading picks up.

The comments echo a more optimistic stance from trading desks at global investment banks after a bumper quarter boosted by the European Central Bank’s announcement of a bond-buying scheme to spur growth.

They also contrast with last year’s more lackluster picture of stock trading, particularly in Europe, with tepid volume growth and increased regulatory scrutiny squeezing commissions and stoking fears of more cutbacks.

“We are not pulling back in equities, quite the opposite,” said Tim Gately, Citi’s head of equities for Europe, Middle East and Africa (EMEA), in an interview. “We continuously invest in technology, have made a number of senior hires and expect to grow our market and wallet share in 2015.”

Citi, which said in the fourth quarter it would take actions to turn around its underperforming EMEA equities franchise, is making a push for a bigger share of spending from top clients and hedge funds, Gately added.

The bank has named Murray Roos as London-based global head of sales for equities and prime finance and Emmanuel Girod as global head of exotics trading.

Larger rival JPMorgan also expects to gain market share, according to Michael Wilson, head of EMEA equity sales at the bank, thanks to a dedicated hedge-fund sales team, better client targeting and new global equity products.

MORE TARGETED

At a time of tighter balance-sheet rules and cost cuts, banks in general are taking a more targeted approach to client lists when allocating resources.

“We are targeting market-share gains primarily via cross-selling, and so prime brokerage (specialist services for hedge funds) is a big opportunity … We are also ready to be there for clients should rivals pull back,” said JPMorgan’s Wilson.

“We are investing and hiring within specialist sales, execution and technology.”

Growing in cash equities is a multi-year objective for JPMorgan but the bank is already reaping some success from client segments including hedge funds.

Some have warned, however, that the optimism in equities may be more a case of market bullishness than a new dawn for highly automated, high-return but volume-dependent stock trading.

Some banking sources said they still expected some smaller players to cut back or exit equities given competitive pressures.

Yet first-quarter equities revenue grew at double-digit percentage rates for a number of U.S. banks including Morgan Stanley and JPMorgan, though Citi bucked the trend with a 1 percent decline.

The pick-up was also broadly felt in Europe, with Germany’s Deutsche Bank unveiling a plan to invest in its small but growing equities trading division.

Trading conditions are set to stay positive, said Gately, thanks to near-zero yields in much of the bond market, which made equities more attractive. “The first quarter was not just a blip (for the industry),” he said.

(Editing by Pravin Char and David Holmes)

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