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SCMP Reporter

Union Bank of Switzerland (UBS) and Swiss Bank Corp (SBC) have confirmed a merger to create the world's second-largest bank and largest asset manager in a move that will see 13,000 jobs lost around the world.

 Yesterday, officials from SBC and UBS - which will form the new United Bank of Switzerland - insisted that only a small proportion of job losses would come from Asia.

 They said the group would not be influenced by the rash of cut-backs taking place in brokerages in the region.

 The deal is aimed at catapulting the new group into the so-called 'bulge bracket' - the world's investment banking elite.

 United Bank, with combined assets of US$636 billion, will be second only to Bank of Tokyo-Mitsubishi in asset size, and, with a combined market capitalisation of US$59 billion - before the merger announcement - will be ranked fourth after HSBC, Bank of Tokyo-Mitsubishi and Lloyds TSB.

 Commanding 1.32 trillion Swiss francs (about HK$7.07 trillion) in funds under management, the group would jump Japan's Postal Life Insurance Bureau and Fidelity of the United States to become the world's biggest fund manager, officials said.

 About 6,000 jobs around the world, along with 7,000 in Switzerland, will be lost over a period of three to four years as a result of the deal.

 Bank officials said a high proportion of the job losses were likely to come from Europe and the United States, where there was the most overlap.

 'We are intent on becoming a bigger bank [in Asia],' a UBS official said.

 UBS' Asian chief of staff, Philip Eisenbeiss, said economies of scale might be achieved in some of the banks' support functions in the region.

 'Information technology and logistics are one of the largest cost factors,' he said.

 'There will be redundancies. I don't know where they will be, but the lion's share will be in Switzerland.

 'It would be disingenuous of me to say there aren't going to be any . . . there are only so many analysts who can cover the same company.'  The banks employ about 5,000 employees in 17 offices across the combined Asian private banking, investment banking and asset management operations.

 UBS employs about 500 people in Hong Kong, 600 in Tokyo and 500 in Singapore. SBC Warburg employs 3,000 Asia-wide, but it declined to break this down.

 A merger implementation committee, expected to include new regional chairman Lim Ho Kee and chief executive officer Luqman Arnold, will look at all areas of potential overlap and is expected to report in four weeks.

  Industry experts yesterday said there were numerous areas of overlap, particularly in the banks' domestic commercial banking business, but one head of equity capital markets at a European investment bank also pointed to their Asian equity operations.

 'In Asia, these banks have gone head-to-head in sales, equity capital markets and equity derivatives,' the banker said.

 'There will be substantial losses in these areas.'   He estimated that 1,500 regional jobs could go.

  Several investment banks have already announced cut-backs in the face of the prolonged regional turmoil, but Mr Eisenbeiss said the spate of redundancies that had been witnessed recently had been among agency brokers, and Swiss banks took a more 'holistic' approach.

 'The brokerages scaling back tend to be principally agency brokerages . . . we take a very integrated approach,' Mr Eisenbeiss said.

 He said he was also 'not terribly upset' with the regional markets crisis, as it opened opportunities for equity and debt-capital market financing opportunities.

 'I do think there are now emerging opportunities; valuations are looking better,' he said.

 Other bankers were less sure.

 'Both of these houses have fully fledged Asian operations. There are bound to be consequences,' one said.

 One head of capital markets at a European investment bank said low returns on commercial banking in Switzerland made the move necessary, as the country had an average of 2,000 customers at each branch.

 'It has nothing to do with investment banking - it just gives the bank in Switzerland the opportunity to sack lots of people,' he said.

 UBS spokesman Maeve Gallager said the overlap between the two was not substantial outside their Switzerland base, but rival bankers said there was greater justification for a merger in the debt markets.

 A syndicate manager from a European house said: 'In the convertible bond market, UBS are third and SBC fourth, but neither is that strong in Asia.'  UBS is also seen to have strength in derivatives and the local currency markets, while SBC has a limited presence.

 A banker said: 'Especially in Asia, relationships are important in corporate banking - co-manager positions in debt and equity syndications are often decided on that basis.'  A banking analyst at a US investment bank pointed to the limited exposure of the two banks in Asia, citing Merrill Lynch figures released last month.

 The survey showed only 7.3 per cent of SBC Warburg Dillon Read's asset value was derived from Asia, while UBS received only 6.5 per cent from the region.



UBS-SBC in US$636b merger