Embattled UBS poised for merger with SBC

Lea Paterson
Sunday 23 October 2011 02:07

Swiss banking giant UBS is poised for a multi-billion merger of part or all of its operations with its rival SBC, banking sources said last night. As Lea Paterson reports, a merger may be the only lifeline for embattled UBS.

Employees of Union Bank of Switzerland (UBS) have been summoned to weekend meetings to hear details of their fate, according to banking sources. UBS is expected to announce a merger with rival Swiss Bank Corporation (SBC), a move which would lead to a jobs "bloodbath" in both the City and elsewhere. A full-scale merger of the two banks would create one of the largest banks in the world, with assets of more than pounds 350bn.

"UBS has been in paralysis for six months because there's been a feeling that a major announcement is on its way. The bank's lost several key staff in the process," said one insider yesterday.

Discussions between the two banks are thought to have begun some months ago, following UBS's snub to Switzerland's third banking giant, Credit Suisse First Boston (CSFB), last year. In April 1996, UBS rejected overtures from CSFB, which recently took control of parts of BZW, Barclays' investment banking arm.

Sources close to UBS say the beleaguered bank could hive off some of its banking activities and merge the remainder with SBC. JP Morgan, the US investment bank, has been named as a likely bidder for the Swiss bank's sizeable equities business. And speculation has also focused on Deutsche Bank, the German banking giant, as a possible purchaser of UBS's Swiss client portfolio.

Shares in both UBS, whose board met yesterday, and SBC, were sharply higher in Zurich trading yesterday.

The Swiss market is heavily over-banked, and all three Swiss banking giants posted heavy losses last year. Merger speculation has been heightened in recent weeks following comments from a major UBS shareholder, Swiss investor Martin Ebner. Mr Ebner recently suggested that it would make sense for two of the Swiss banks to merge and then hive off some business or join forces with a foreign partner.

"UBS is no longer master of its own destiny. If it tries to stay on its own, it's already too late for it to succeed," commented one source last night.

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