STO Santos Limited

Former Credit Suisse Group AG Chief Executive Brady Dougan plans to launch a merchant bank in early 2017 and has lined up a $3 billion investment to seed the venture, according to people familiar with the matter.

Mr. Dougan's firm will be backed by Scepter Partners, a syndicate of Middle Eastern ultrawealthy families and state investment funds. The business, which is slated to launch next spring, will aim to make investments across a number of industries while providing investment-banking and trading services, the people said.

While the contours of Mr. Dougan's plans are still taking shape, the concept is broader than many of the boutique firms other senior Wall Street executives have opened as they embarked on the next stage of their careers. Many of them have stuck to peddling merger advice and other businesses that require little financial risk-taking.

Mr. Dougan, 57 years old, is going a different route. At the new firm, whose name has yet to be determined, Mr. Dougan could use the funds provided by Scepter to trade with clients and potentially for its own account, as well as underwrite capital raisings, the people said. Added debt could give the new business billions of dollars more to put to work beyond Scepter's $3 billion investment. The entity is expected to draw additional investors, including Mr. Dougan himself, the people said.

A former equities trader, Mr. Dougan began his tenure as Credit Suisse's CEO just before the financial crisis. On his watch, the firm was lauded for steering clear of many of the major headaches that hit other banks, but he later left as the firm struggled with poor performance.

At the new firm, Mr. Dougan aims to compete with Wall Street firms in core, capital-intensive businesses. His ambitions reflect challenges facing big banks and the opportunities for upstarts. That his money comes from sovereign-wealth funds also shows that these investors, which have long used traditional banks and private-equity firms as intermediaries to financial activities, want to flex their muscles in new ways.

While the new venture's total capital is a fraction of the balance sheets held by big Wall Street firms, those banks are required by U.S. regulators to hold extra capital cushions against their trades. Housing certain businesses in a firm that is outside of the Federal Reserve's oversight could make them more profitable or allow them to charge less for the same services than big banks do, analysts and bankers have said.

Advances in software and data have also emboldened a generation of startup executives to use technology to break into parts of the financial-services industry dominated by big banks and brokers. Mr. Dougan's new firm is exploring ways to bring those methods to investment banking, a place on Wall Street relatively unchanged by technology, according to people familiar with the firm's plans.

Talks between Mr. Dougan and Bermuda-based Scepter began about six months ago, people familiar with the plans said. Scepter in 2015 spun out from BMB Group, a financial firm based in Brunei, and its board includes several members of the Pacific nation's ruling family.

Scepter has about $15 billion in discretionary funds and is backed by a network of ultrawealthy families and government funds valued at more than $100 billion, according to its website. It is focused on natural resources and infrastructure, and last year made an unsuccessful takeover bid for Australian oil-and-gas producer Santos Ltd.

Mr. Dougan will launch his firm with more funding, at least initially, than many of the merchant banks that have opened since the financial crisis.

More than a dozen Wall Street executives have struck out on their own in recent years, aiming to peel away business from their former employers. Among the best known were Morgan Stanley's Paul Taubman , Goldman Sachs Group Inc.'s Byron Trott and Barclays PLC's Robert Diamond and Hugh "Skip" McGee.

Mr. Dougan, a soft-spoken Illinois native known for running marathons, was credited at Credit Suisse with bringing in institutional investors, including sovereign-wealth funds, to help strengthen the bank's balance sheet. Mr. Dougan used those relationships to expand Credit Suisse's wealth-management franchise into the Middle East through a joint venture with Qatar's state investment fund.

But Mr. Dougan also oversaw the bank as it addressed questions about its role in helping Americans evade taxes, leading to a $2.6 billion settlement and a guilty plea for the bank. Its share price stagnated and it came under pressure from investors to cut its investment-banking business.

Mr. Dougan's successor, Tidjane Thiam, has moved to aggressively shrink the firm's investment-banking activities. Credit Suisse's share price is down roughly 50% since Mr. Dougan stepped down in the spring of 2015.

Anupreeta Das contributed to this article.

Write to Liz Hoffman at liz.hoffman@wsj.com and Justin Baer at justin.baer@wsj.com

(END) Dow Jones Newswires

November 22, 2016 17:45 ET (22:45 GMT)

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