The challenge of Mr Ospel's osmosis

John Eisenhammer meets Warburg's new chief executive in waiting, while John Willcock looks at the hopes of the bank's fund management arm
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The Independent Online
Marcel Ospel's skill as a motivator is widely admired within Swiss Bank Corporation, but nobody was going to rely on this alone to ensure Warburg's traumatised talent stood by their new boss in this difficult hour. With the ink still fresh on the takeover document, the chief executive- in-waiting of Britain's premier investment bank has moved fast to draw up a defection-stopping incentive package.

"The mechanisms are all lined up. A combination of cash, phantom stock options and SBC shares will be used to signal to those individuals we value highly that we want to look into the future with them. It will be announced in a few weeks," Mr Ospel told the Independent in his first interview with a British newspaper.

Thoroughly demoralised in recent months, Warburg has lost a number of key players, notably in European equities, most of whom have been snapped up by Morgan Grenfell. "We would welcome them back. They have my phone number," says the 45-year-old head of SBC's investment banking activities.

Linked to the incentives is a conscious effort to dampen acute fears among Warburg staff of mass axings once SBC gets down to integrating the British merchant bank into the much bigger Swiss operation. "We have not bought Warburg to shrink it," he says. At the sharp business end, the main overlap is in primary equities, which is where cuts will fall. But the biggest losses are expected in back-office support in the international business. "We have quite some overlap in our global networks, purely in infrastructure terms. Warburg operates in 35 locations, and we are in 32," Mr Ospel says.

For all the high-profile acrimony in the recent past between Warburg and SBC, Marcel Ospel says the two houses make a rare perfect fit, possibly because they are so unlike one another. "You have to understand where SBC is coming from," he says. "We have turned a commercial banking institution into an investment bank. But first, we had to build the product base before we could think of moving on to client orientation."

With acquisition of Warburg, which still requires shareholder approval, that transformation is set to take a quantum leap forward. Client orientation lies at the heart of the British merchant banking culture, and is something Warburg has done well. "It is going to determine very much the culture of SBC. We are a high-tech, product-driven organisation, as opposed to the Warburg culture of corporate finance, of client focus. Warburg's franchise will complement and reinforce SBC's risk management product range."

No one is more aware of what such a transformation means than Mr Ospel, who at the tender (by Swiss standards) age of 40, was put in charge of spearheading the high-risk thrust into the investment banking jungle.

Mr Ospel was not one for half measures, leapfrogging his more established rivals at UBS and Credit Suisse by buying O'Connor Partners, the Chicago- based derivatives rocket scientists. The culture chasm could hardly have been wider, but Mr Ospel persisted, forging the basis for SBC's formidable reputation as a derivatives powerhouse. SBC is now the single biggest derivatives player in the City.

Perhaps because of that success, Mr Ospel is not daunted by the challenge of folding Warburg's notoriously arrogant, prickly troops into his bigger battalions. This is not going to be a gentle, arm's-length-to-begin-with process, like Deutsche Bank with Morgan Grenfell or UBS with Phillips & Drew.

"We had the possibility of leaving global risk management on one side, and European investment banking on the other. But we did not want that, and nor did Warburg. The best way to make this succeed is to integrate completely from the start."

One of the more formidable challenges will be what to do about the US market, on which Warburg expended much energy and money only to see its grander ambitions founder. "Until we are properly integrated, we do not have the appetite for domestic US capital-raising activities. Maybe it will be different in two years, but we are concentrating now on strengthening the distribution into the US of non-American instruments, including derivatives and cross-border M&A."

As for the lament that yet another once-great British industry is falling into the hands of foreigners taking over the City, Mr Ospel suggests that such worries are misguided in today's global finance business. "The fact that I am moving to London indicates how seriously we take this city as the pre-eminent international capital market." But that leaves Mr Ospel with another urgent problem - finding a house. "I hope to snatch a few minutes this weekend for house-hunting, but I could do with some advice on where to look."