Oct 3 (Reuters) - Flagstar Bank is looking to

build out its investment office and will begin hiring soon, a

top executive told Reuters, as the lender looks to reduce its

reliance on distressed commercial real estate lending.

The plan, which is in an early stage, underscores the

lender's effort to tap into wealth management for a steady

source of revenue, which could prove to be crucial in its effort

to cut exposure to CRE loans that had hurt results last year.

"I'm looking to hire a couple of people this year. And then

next year, I'm going to follow that on with double or triple

that amount," said Brett Mitstifer, chief investment officer of

private banking and wealth management, in an interview.

The lender will soon begin distributing market views

internally, with external client communications to follow, said

Mitstifer, an HSBC veteran who took up the new role in

September.

Flagstar is a unit of Flagstar Financial ( FLG/PU ), which was

known as New York Community Bancorp until it was rebranded last

year.

The bank had last year come under pressure when elevated

interest rates and weak demand for office-space strained CRE

borrowers, prompting a $1 billion capital infusion and a

leadership shake-up, including the appointment of a new CEO.

Mitstifer said the bank's clients are now confident in the

safety of their funds at Flagstar. "People understand what

happened. And they get comfortable very quickly when they meet

the management team," he said.

The bank's shares have gained about 25% this year in a sign

of investor support to the turnaround efforts, outpacing the

benchmark S&P 500's 14.2% rise in the same period.

The wealth management industry, however, is an

ultra-competitive field dominated by Wall Street heavyweights

such as Morgan Stanley ( MS ), JPMorgan Chase ( JPM ) and

Goldman Sachs ( GS ), which oversee trillions in assets and

command a big share of the market.

Mitstifer said smaller banks such as Flagstar can carve out

a niche by offering more personalized service and quicker

responses, something that is often lacking at bigger

institutions.

"There's a bit of a void out there after the regional

banking crisis," he said.