City jobs on the line as Swiss banking giants announce pounds 35bn merg er

Up to 2,000 highly paid City workers could lose their jobs after two Swiss banking giants, UBS and SBC, confirm plans today to merge operations in a deal worth pounds 35bn. As Clifford German reports, the move comes as dealers and analysts in London wait for bonuses worth some pounds 1bn.

According to analysts up to 10,000 jobs are at risk in Switzerland, with as many as 2,000 set to go in London, after Union Bank of Switzerland (UBS) and Swiss Bank Corporation (SBC) announce a full-blown merger before the Swiss stock exchanges open this morning.

The two Swiss giants have combined assets of 800bn Swiss francs (pounds 330bn), market capitalisation of SFr83bn and 57,000 employees, including 6,000 in London.

Today's announcement will confirm the merger, subject to the approval of the banking regulators in Switzerland, which could take months to secure. It is not expected to go into details over closures, job losses or disposals, though City experts yesterday predicted a huge shake-out of their combined London workforces to cut costs.

Job losses and insecurity have become a common feature of City mergers, despite the financial community's reputation for huge salaries. SBC's deal to buy SG Warburg resulted in around 1,000 job cuts.

The rationale behind such deals has been the substantial overlap between the investment banking businesses of SBC Warburg and UBS in London. Both are big players in international equities and corporate finance.

This deal comes at the start of the City bonus season, with payouts expected to rise for some key workers by as much as 30 per cent. Goldman Sachs, the US investment bank, is expected soon to pay more than 100 partners in its London operation bonuses of at least pounds 1m each.

The merger is a response to increasing competition in retail and private banking in Switzerland, which is perhaps the most over-banked country in the world. Until this year UBS was the biggest of the three big Swiss banks ahead of Credit Suisse, with a market capitalisation of pounds 20bn and 28,500 employees.

Early last year it rejected an approach from Credit Suisse, which has since taken over Winterthur, the Swiss insurance company, to become the biggest single Swiss banking company. The UBS board has been under sustained pressure to improve its performance from shareholders.

Its London-based investment management has also been criticised by trustees of pension funds. One of its leading fund managers, Tony Dye, made his much publicised move nearly two years ago to put more investment fund money into cash, in anticipation of heavy falls in US, UK and European stock markets which did not materialise.

SBC is the smaller of the two banks with a market capitalisation of around pounds 15bn and 26,500 employees, including around 3,000 in London. However, its 46-year-old chief executive, Marcel Ospel, is the driving force behind the merger, and was behind the successful acquisitions of SG Warburg in London and Dillon Read in New York.