Swiss Bank Corporation
Encyclopedia
Swiss Bank Corporation (German: Schweizerischer Bankverein (SBV), French: Société de Banque Suisse (SBS), Italian:Società di Banca Svizzera) was a large integrated financial services company located in Switzerland. Prior to its merger, the bank was the third largest in Switzerland with over 300 billion CHF of assets and 11.7 billion CHF of equity.
Throughout the 1990s, SBC engaged in a large growth initiative, shifting its focus from traditional commercial banking into investment banking
, in an effort to match its larger Swiss rival Credit Suisse
. As part of this strategy, SBC acquired US-based investment bank Dillon Read & Co. as well as London-based merchant bank S.G. Warburg in the mid-1990s. SBC also acquired Chicago-based Brinson Partners
and O'Connor & Associates
. These acquisitions formed the basis for a global investment banking business.
In 1998, SBC merged with Union Bank of Switzerland
in 1998, to form UBS, the largest bank in Europe and the second largest bank in the world. The company's logo, which featured three keys, symbolizing "confidence, security, and discretion", was adopted by UBS after the 1998 merger. Although the combination of the two banks was billed as a merger of equals, it quickly became evident that from a management perspective, it was SBC that was buying UBS as nearly 80% of the top management positions were filled by legacy Swiss Bank professionals. Today, what was SBC forms the core of many of UBS's businesses, particularly UBS Investment Bank.
banks in Switzerland such as Swiss Bank's earliest predecessors (often structured as a Swiss Verein
) was driven by the industrialization of the country and the construction of railroads in the mid-19th century.
The Basler Bankverein was formally organized in 1872 in Basel, replacing the original Bankverein consortium. Basler Bankverein was founded with an initial commitment of 30 million CHF, of which 6 million of initial share capital was paid in. Among the Bankverein's early backers was the Bank in Winterthur
, one of the early predecessors of the Union Bank of Switzerland
. The bank experienced initial growing pains after heavy losses in Germany caused the bank to suspend its dividend in favor of a loss reserve. By 1879, Basler Bankverein has accumulated enough capital to resume dividends, initially at an 8% annual rate and then increasing to 10% in 1880.
Basler Bankverein later combined with Zürcher Bankverein in 1895 to become the Basler & Zürcher Bankverein. The next year, Basler Depositenbank and Schweizerische Unionbank were acquired. After the take-over of the Basler Depositenbank, the bank changes its name to Schweizerischer Bankverein (Swiss Bank). The English name of the bank was changed to Swiss Bank Corporation in 1917.
The onset of World War I
put a hold on much of the bank's development. Although SBC survived the war intact, it suffered the loss of its investments in a number of large industrial companies. Nevertheless, the bank surpassed 1 billion CHF for the first time at the end of 1918 and grew to 2,000 employees by 1920. In 1918, SBC purchased Métaux Précieux SA Métalor
to refine precious metals and produce bank ingots. the company would be established as a separate subsidiary in 1936 and spun-off in 1998. The impact of the stock market crash of 1929 and the Great Depression
would be severe, particularly as the Swiss franc suffered major devaluation in 1936. The bank would see its assets fall from a 1929 peak of 1.6 billion CHF to its 1918 levels of 1 billion CHF by 1936.
In 1937 , SBC adopted its three keys logo symbolizing confidence, security and discretion. The logo was designed by a Swiss artist and illustrator, Warja Honegger-Lavater
.
, SBC was the recipient of large influxes of foreign funds for safekeeping. Just prior to the outbreak of World War II, in 1939, Swiss Bank Corporation made the timely decision to open an office in New York City. The office was able to begin operations, located in the Equitable Building
, just weeks after the outbreak of the war and was intended as a safe place to store assets in case of an invasion. During the war, the bank's traditional business fell off and the Swiss government became its largest client. Overall, SBC saw its business grow as a result of its wartime government underwriting business.
Decades after the war, it was demonstrated that Swiss Bank Corporation likely took an active role in trading stolen gold, securities and other assets during World War II.
In 1997, the World Jewish Congress lawsuit against Swiss banks
(WJC) was launched to retrieve deposits made by victims of Nazi persecution during and prior to World War II. Negotiations involving SBC's successor UBS, Credit Suisse
, the World Jewish Congress
and Stuart Eizenstat, on behalf of the U.S., ultimately resulted in a settlement of $1.25 billion in August 1998 paid by the two large Swiss banks UBS and Credit Suisse
. The settlement, which coincided with UBS's merger with Swiss Bank, together with the bank's embarrassment in the Long Term Capital Management collapse in 1998 brought a degree of closure to the issue.
SBC prospered throughout the 1950s and embarked on a period of sustained growth. The bank, which had entered the 1950s with 31 Branch Offices in Switzerland and three abroad, more than doubled its assets from the end of the war to 4 billion CHF by the end of the 1950s and doubled assets again by the mid-1960s, exceeding 10 billion CHF in 1965. SBC acquired Banque Populaire Valaisanne, Sion, Switzerland
, and the Banque Populaire de Sierre. The firm continued to open new offices in the U.S. in the mid-1960s and it was also at this time that SBC began to expand into Asia and opened representative offices throughout Latin America. The bank opened a full branch office in Tokyo in 1970. The bank also made a number of acquisitions to enhance its position in various products. SBC acquired a controlling interest in Frei, Treig & Cie. in 1968, Warag Bank in 1970 and Bank Prokredit in 1979 (later sold to GE Capital
in 1997). All three banks focused on consumer lending. Similarly, SBC acquired a number of banks in the private banking sector, including Ehinger & Cie. in 1974; Armand von Ernst & Cie. and Adler & Co. in 1976; and a majority interest in Geneva-based Ferrier Lullin & Cie. in 1978. The bank continued its consolidation of Swiss banks acquiring Banque Commerciale de Sion in 1978 and in 1979 acquired Handwerkerbank Basle, the Banca Prealpina SA and Bank für Hypothekarkredite.
As its own home market was highly competitive, SBC focused on commercial banking for American and other multinational companies. Through 1979, SBC was consistently the largest of the three major Swiss Bank by assets, except for short periods in 1962 and 1968 when UBS temporarily moved ahead of SBC. After 1979, although its balance sheet had grown to 74 billion CHF of assets, the bank would typically rank second to UBS which firmly established itself as the largest Swiss bank in the 1980s. SBC would retain this position for the next 15 years until Credit Suisse
leapfrogged into the top spot following its 1995 acquisitions of Schweizerische Volksbank and Winterthur Group
.
. SBC had been impacted by losses on its real estate investments and a series of minor controversies, despite the bank's historically conservative posture. Beginning in the 1980s, SBC along with its Swiss peers began to embrace a more aggressive strategy to keep up with competitors in the U.S., Japan, Germany and the U.K. The bank signaled its new posture in 1990 when it opened its new U.S. headquarters, Swiss Bank Tower, a 29 floor building on 49th Street, adjoining Saks Fifth Avenue
.
SBC shifted its focus from traditional commercial banking toward investment banking
with an emphasis on building its trading operations. To bolster its trading initiative, in 1992, SBC acquired O'Connor & Associates
, a Chicago-based options trading firm, with an expertise in financial derivatives. O'Connor
was founded in 1977 by mathematician Michael Greenbaum and was named for Edmund (Ed) and Williams (Bill) O'Connor. The O'Connor brothers had made a fortune trading grain on the Chicago Board of Trade
and founded a First Options, a clearing house
business. The O'Connors provided Greenbaum, who had run risk management for First Options, with the capital to start his own firm. SBC had established a strategic relationship with O'Connor
, which was the largest market maker
in the financial options exchanges in the U.S., beginning in 1988. O'Connor had been looking to partner with a larger financial institution and in 1989 entered into a currency joint venture with SBC that proved to be the first step towards a sale of O'Connor to SBC. Following the merger, O'Connor was combined with SBC's money market
, capital market
and currency market activities to form a globally integrated capital markets and treasury operation. A number of O'Connor executives were brought into key positions within the bank in an attempt to cultivate a more entrepreneurial culture at SBC.
In 1994, SBC followed up its acquisition of O'Connor by acquiring Brinson Partners an asset management firm focused on providing access for U.S. institutions to global markets. Founded by Gary P. Brinson, an innovator in financial management, Brinson Partners had emerged as one of largest managers of pension plans and also managed a series of mutual funds. Brinson was a pioneer in the development of the theory of asset allocation
which had largely become conventional wisdom among money managers in the 1980s and 1990s. Brinson had begun working at First Chicago Corporation in the 1970s and by 1981 began building the business that would become Brinson Partners. In 1989, Brinson led a $100 million management buyout
of his firm from First Chicago Corporation and over the next five years built up the firm to approximately $36 billion of assets under management. SBC paid $750 million to acquire Brinson Partners, which resulted in a profit to Brinson and his partners of $460 million on the sale of their 75% stake in the company. Following the acquisition of Brinson Partners, Gary Brinson ran SBC's asset management business and after the merger with UBS, Brinson was named chief investment officer of UBS Global Asset Management.
SBC's next made a major push into investment banking with the acquisition of S.G. Warburg & Co. a leading British investment banking firm in 1995 for $1.4 billion. S.G. Warburg was founded by Siegmund Warburg, a member of the Warburg banking family
. After World War II, S.G. Warburg established a reputation as a daring merchant bank
that grew to be one of the most respected investment banks in London. Following a flawed and costly expansion into the US, in 1994 a merger was announced with Morgan Stanley
, but the talks collapsed. The following year S.G. Warburg was purchased by Swiss Bank Corporation,. The bank merged S.G. Warburg with its own existing investment banking unit to create SBC Warburg, which became a leading player in global investment banking.
Two years later, in 1997, SBC paid $600 million to acquire Dillon, Read & Co.
, a white shoe U.S. investment banking firm considered to be a member of the bulge bracket
. Dillon, Read, which traced its roots to the 1830s was among the powerhouse firms on Wall Street in the 1920s and 1930s and by the 1990s had a particularly strong mergers and acquisitions
advisory group. Dillon Read had been in negotiations to sell itself to ING
which owned 25% of the firm already, however Dillon Read partners balked at ING's integration plans. After its acquisition by SBC, Dillon Read was merged with SBC-Warburg to create SBC-Warburg Dillon Read. The Dillon Read name was discontinued after the merger with Union Bank of Switzerland
although it was brought back in 2005 as Dillon Read Capital Management, UBS's ill-fated hedge fund operations.
which had approached UBS about a merger that would have created the second largest bank in the world in 1996. UBS's management and board unanimously rebuffed the proposed merger. Ebner, who supported the idea of a merger, led a major shareholder revolt that resulted in the replacement of UBS's chairman, Robert Studer. Studer's successor Mathis Cabiallavetta would be one of the key architects of the merger with SBC.
On December 8, 1997, Union Bank of Switzerland
and SBC announced an all stock merger. At the time of the merger, Union Bank of Switzerland and Swiss Bank Corporation were the second and third largest banks in Switzerland, respectively, both trailing Credit Suisse
. Discussions between the two banks had begun several months earlier, less than a year after rebuffing Credit Suisse
's merger overtures.
The all-stock merger resulted in the creation UBS AG
, a huge new bank with total assets of more than $590 billion. Also referred to as the "New UBS" to distinguish itself from the former Union Bank of Switzerland, the combined bank became the second largest in the world, at that time, behind only the Bank of Tokyo-Mitsubishi. Additionally, the merger pulled together the banks' various asset management businesses to create the world's largest money manager, with approximately $910 billion in assets under management
.
The merger, which was billed as a merger of equals, resulted in SBC's shareholders receiving 40% of the bank's common shares and Union Bank's shareholders receiving 60% of the combined company. SBC's Marcel Ospel
was named chief executive officer while Union Bank's Mathis Cabiallavetta
became chairman of the new bank. However, it quickly became evident that from a management perspective, it was SBC that was buying UBS as nearly 80% of the top management positions were filled by legacy Swiss Bank professionals. Additionally, UBS professionals suffered more headcount reductions, particularly in the investment banking unit where there were heavy cuts in the corporate finance and equities businesses. Prior to the merger, Swiss Bank Corporation had built a global investment banking business, Warburg Dillon Read
through its acquisitions of Dillon Read in New York and S.G. Warburg in London. SBC was generally considered to be further along than UBS in developing its international investment banking business, particularly in the higher margin advisory businesses where Warburg Dillon Read
was considered to be the more established platform.
After the merger was completed, it was widely speculated that a series of losses suffered by UBS on its equity derivative
positions in late 1997 provided SBC with the leverage it required to consummate the merger. It would become clear that the derivatives losses prompted UBS to accept the terms proposed by SBC more readily than they otherwise would have.
UBS, the successor of the Union Bank of Switzerland, is among the largest diversified financial institutions in the world. As of 2010, UBS operated in all of the major financial centers worldwide with offices in over 50 countries and 64,000 employees globally.
In November 2000, UBS merged with Paine Webber an American
stock broker
age and asset management firm led by chairman and CEO, Donald Marron
. The acquisition pushed UBS to the top Wealth and Asset Management Firm in the world. Initially the business was given the divisional name "UBS PaineWebber" but in 2003 the 123-year-old name Paine Webber disappeared when it was renamed "UBS Wealth Management USA."
The bank would grow considerably in the 2000s, building a large investment banking franchise to compete with the major U.S. and European bulge bracket firms. However, UBS suffered major setbacks in 2007, 2008 and 2009. UBS suffered among the largest losses of any European bank during the subprime mortgage crisis
and the bank was required to raise large amounts of outside capital from the Government of Singapore Investment Corporation
, the Swiss government and through a series of equity offerings in 2008 and 2009.
was the result of the combination of dozens of individual firms, many of which date to the 19th century. The following is an illustration of the company's major mergers and acquisitions and historical predecessors, although this is not necessarily a comprehensive list:
Throughout the 1990s, SBC engaged in a large growth initiative, shifting its focus from traditional commercial banking into investment banking
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
, in an effort to match its larger Swiss rival Credit Suisse
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
. As part of this strategy, SBC acquired US-based investment bank Dillon Read & Co. as well as London-based merchant bank S.G. Warburg in the mid-1990s. SBC also acquired Chicago-based Brinson Partners
Brinson Partners
Brinson Partners was an asset management firm focused on providing access for U.S. institutions to global markets. The firm was founded by noted investor Gary P. Brinson in the 1980s and established as an independent firm in 1989...
and O'Connor & Associates
O'Connor & Associates
O'Connor & Associates was a Chicago-based options trading firm, with particular emphasis on financial derivatives. The firm was acquired by Swiss Bank Corporation O'Connor & Associates was a Chicago-based options trading firm, with particular emphasis on financial derivatives. The firm was...
. These acquisitions formed the basis for a global investment banking business.
In 1998, SBC merged with Union Bank of Switzerland
Union Bank of Switzerland
Union Bank of Switzerland was a large integrated financial services company located in Switzerland. The bank, which at the time was the second largest bank in Switzerland, merged with Swiss Bank Corporation in 1998, to become UBS to form what was then the largest bank in Europe and the second...
in 1998, to form UBS, the largest bank in Europe and the second largest bank in the world. The company's logo, which featured three keys, symbolizing "confidence, security, and discretion", was adopted by UBS after the 1998 merger. Although the combination of the two banks was billed as a merger of equals, it quickly became evident that from a management perspective, it was SBC that was buying UBS as nearly 80% of the top management positions were filled by legacy Swiss Bank professionals. Today, what was SBC forms the core of many of UBS's businesses, particularly UBS Investment Bank.
History
Swiss Bank Corporation traces its history to 1854. In that year, six private banking firms in Basel, Switzerland, pooled their resources to form the Bankverein, a consortium that acted as an underwriting syndicate for its member banks. Among the original member banks were Bischoff zu St Alban, Ehinger & Cie., J. Merian-Forcart, Passavant & Cie., J. Riggenbach and von Speyr & Cie. The establishment of joint-stockJoint stock company
A joint-stock company is a type of corporation or partnership involving two or more individuals that own shares of stock in the company...
banks in Switzerland such as Swiss Bank's earliest predecessors (often structured as a Swiss Verein
Swiss Verein
A Swiss Verein is a legal structure in Swiss law. It is similar to the Anglo-American voluntary association. Unlike in Germany, a Swiss Verein does not need to be registered in order to have a separate legal personality...
) was driven by the industrialization of the country and the construction of railroads in the mid-19th century.
The Basler Bankverein was formally organized in 1872 in Basel, replacing the original Bankverein consortium. Basler Bankverein was founded with an initial commitment of 30 million CHF, of which 6 million of initial share capital was paid in. Among the Bankverein's early backers was the Bank in Winterthur
Bank in Winterthur
The Bank in Winterthur is one of the original predecessor banks to the Union Bank of Switzerland and ultimately UBS. Established in 1862, the bank merged with Toggenburger Bank in 1912 to form the Union Bank of Switzerland.-History:...
, one of the early predecessors of the Union Bank of Switzerland
Union Bank of Switzerland
Union Bank of Switzerland was a large integrated financial services company located in Switzerland. The bank, which at the time was the second largest bank in Switzerland, merged with Swiss Bank Corporation in 1998, to become UBS to form what was then the largest bank in Europe and the second...
. The bank experienced initial growing pains after heavy losses in Germany caused the bank to suspend its dividend in favor of a loss reserve. By 1879, Basler Bankverein has accumulated enough capital to resume dividends, initially at an 8% annual rate and then increasing to 10% in 1880.
Basler Bankverein later combined with Zürcher Bankverein in 1895 to become the Basler & Zürcher Bankverein. The next year, Basler Depositenbank and Schweizerische Unionbank were acquired. After the take-over of the Basler Depositenbank, the bank changes its name to Schweizerischer Bankverein (Swiss Bank). The English name of the bank was changed to Swiss Bank Corporation in 1917.
1900–1939
SBC continued to grow in the early decades of the 20th century, acquiring weaker rivals. In 1906, SBC purchased Banque d'Espine, Fatio & Cie, establishing a branch in Geneva, Switzerland, for the first time. Two years later, in 1908, the bank acquired Fratelli Pasquali, a bank in Chiasso, Switzerland, its first representation in the Italian-speaking portion of the country. This was followed by the 1909 acquisition of Bank für Appenzell (est. 1866) and the 1912 acquisition of Banque d'Escompte et de Dépots.The onset of World War I
World War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
put a hold on much of the bank's development. Although SBC survived the war intact, it suffered the loss of its investments in a number of large industrial companies. Nevertheless, the bank surpassed 1 billion CHF for the first time at the end of 1918 and grew to 2,000 employees by 1920. In 1918, SBC purchased Métaux Précieux SA Métalor
Métaux Précieux SA Métalor
The Metalor Group, previously "Métaux Précieux SA Métalor", founded in 1852, has become one of the major world suppliers of precious metals related products & procedures...
to refine precious metals and produce bank ingots. the company would be established as a separate subsidiary in 1936 and spun-off in 1998. The impact of the stock market crash of 1929 and the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
would be severe, particularly as the Swiss franc suffered major devaluation in 1936. The bank would see its assets fall from a 1929 peak of 1.6 billion CHF to its 1918 levels of 1 billion CHF by 1936.
In 1937 , SBC adopted its three keys logo symbolizing confidence, security and discretion. The logo was designed by a Swiss artist and illustrator, Warja Honegger-Lavater
Warja Honegger-Lavater
Warja Honegger-Lavater was born in Winterthur, Switzerland. She was a Swiss artist and illustrator noted primarily for working in the artist's books genre by creating accordion fold books that re-tell classic fairy tales with symbols rather than words .- Personal life :Honegger-Lavater spent the...
.
Activities in World War II
On the eve of World War IIWorld War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, SBC was the recipient of large influxes of foreign funds for safekeeping. Just prior to the outbreak of World War II, in 1939, Swiss Bank Corporation made the timely decision to open an office in New York City. The office was able to begin operations, located in the Equitable Building
Equitable Building (Manhattan)
The Equitable Building is a 38-story office building in New York City, located at 120 Broadway in the Financial District of Lower Manhattan. A landmark engineering achievement as a skyscraper, it was designed by Ernest R. Graham and completed in 1915...
, just weeks after the outbreak of the war and was intended as a safe place to store assets in case of an invasion. During the war, the bank's traditional business fell off and the Swiss government became its largest client. Overall, SBC saw its business grow as a result of its wartime government underwriting business.
Decades after the war, it was demonstrated that Swiss Bank Corporation likely took an active role in trading stolen gold, securities and other assets during World War II.
In 1997, the World Jewish Congress lawsuit against Swiss banks
World Jewish Congress lawsuit against Swiss banks
The World Jewish Congress lawsuit against Swiss banks was launched to retrieve deposits made by victims of Nazi persecution during and prior to World War II.-Negotiations:...
(WJC) was launched to retrieve deposits made by victims of Nazi persecution during and prior to World War II. Negotiations involving SBC's successor UBS, Credit Suisse
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
, the World Jewish Congress
World Jewish Congress
The World Jewish Congress was founded in Geneva, Switzerland, in August 1936 as an international federation of Jewish communities and organizations...
and Stuart Eizenstat, on behalf of the U.S., ultimately resulted in a settlement of $1.25 billion in August 1998 paid by the two large Swiss banks UBS and Credit Suisse
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
. The settlement, which coincided with UBS's merger with Swiss Bank, together with the bank's embarrassment in the Long Term Capital Management collapse in 1998 brought a degree of closure to the issue.
1945–1990
Swiss Bank Corporation found itself in relatively strong financial condition at the end of World War II, with 1.8 billion CHF of assets. By contrast, the Basler Handelsbank (Commercial Bank of Basel), founded in 1862 and one of the largest banks in Switzerland, was insolvent at the end of the war and was consequently acquired by SBC in 1945. SBC remained among the Swiss government's leading underwriters of debt in the post-war years. However, by 1947 SBC was shifting its focus back to its traditional business of lending money principally to private companies as part of the postwar rebuilding of Europe. Meanwhile, the firm continued its expansion to international markets, particularly the United States where SBC focused primarily on commercial banking for corporate clients. Within Switzerland, SBC remained a full service bank with a domestic retail banking network and an asset management business.SBC prospered throughout the 1950s and embarked on a period of sustained growth. The bank, which had entered the 1950s with 31 Branch Offices in Switzerland and three abroad, more than doubled its assets from the end of the war to 4 billion CHF by the end of the 1950s and doubled assets again by the mid-1960s, exceeding 10 billion CHF in 1965. SBC acquired Banque Populaire Valaisanne, Sion, Switzerland
Sion, Switzerland
Sion is the capital of the Swiss canton of Valais. it had a population of .Landmarks include the Basilique de Valère and Château de Tourbillon. Sion has an airfield for civilian and military use, which, because of its location in a valley, causes a reasonable amount of noise pollution. FC Sion...
, and the Banque Populaire de Sierre. The firm continued to open new offices in the U.S. in the mid-1960s and it was also at this time that SBC began to expand into Asia and opened representative offices throughout Latin America. The bank opened a full branch office in Tokyo in 1970. The bank also made a number of acquisitions to enhance its position in various products. SBC acquired a controlling interest in Frei, Treig & Cie. in 1968, Warag Bank in 1970 and Bank Prokredit in 1979 (later sold to GE Capital
GE Capital
GE Capital is the financial services unit of General Electric, one of five major units. Its various divisions include GE Capital Aviation Services, GE Capital Real Estate, GE Energy Financial Services and GE Money....
in 1997). All three banks focused on consumer lending. Similarly, SBC acquired a number of banks in the private banking sector, including Ehinger & Cie. in 1974; Armand von Ernst & Cie. and Adler & Co. in 1976; and a majority interest in Geneva-based Ferrier Lullin & Cie. in 1978. The bank continued its consolidation of Swiss banks acquiring Banque Commerciale de Sion in 1978 and in 1979 acquired Handwerkerbank Basle, the Banca Prealpina SA and Bank für Hypothekarkredite.
As its own home market was highly competitive, SBC focused on commercial banking for American and other multinational companies. Through 1979, SBC was consistently the largest of the three major Swiss Bank by assets, except for short periods in 1962 and 1968 when UBS temporarily moved ahead of SBC. After 1979, although its balance sheet had grown to 74 billion CHF of assets, the bank would typically rank second to UBS which firmly established itself as the largest Swiss bank in the 1980s. SBC would retain this position for the next 15 years until Credit Suisse
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
leapfrogged into the top spot following its 1995 acquisitions of Schweizerische Volksbank and Winterthur Group
Winterthur Group
AXA Winterthur is a multinational insurance company. The original company named Winterthur was founded in Winterthur, Switzerland, in 1875. Until June 2006, Winterthur was a Credit Suisse subsidiary. Now, Paris-based AXA Insurance has entered into a definitive agreement to purchase Winterthur...
.
Aggressive acquisitions (1990–1998)
Swiss Bank began the 1990s as the weakest of the "Big Three" Swiss banks but by the end of 1997 would be the driving force behind the merger with Union Bank of SwitzerlandUnion Bank of Switzerland
Union Bank of Switzerland was a large integrated financial services company located in Switzerland. The bank, which at the time was the second largest bank in Switzerland, merged with Swiss Bank Corporation in 1998, to become UBS to form what was then the largest bank in Europe and the second...
. SBC had been impacted by losses on its real estate investments and a series of minor controversies, despite the bank's historically conservative posture. Beginning in the 1980s, SBC along with its Swiss peers began to embrace a more aggressive strategy to keep up with competitors in the U.S., Japan, Germany and the U.K. The bank signaled its new posture in 1990 when it opened its new U.S. headquarters, Swiss Bank Tower, a 29 floor building on 49th Street, adjoining Saks Fifth Avenue
Saks Fifth Avenue
Saks Fifth Avenue is a luxury American specialty store owned and operated by Saks Fifth Avenue Enterprises , a subsidiary of Saks Incorporated. It competes in the high-end specialty store market in the Upper East Side of Manhattan, i.e. 'the 3 B's' Bergdorf, Barneys, Bloomingdale's and Lord & Taylor...
.
SBC shifted its focus from traditional commercial banking toward investment banking
Investment banking
An investment bank is a financial institution that assists individuals, corporations and governments in raising capital by underwriting and/or acting as the client's agent in the issuance of securities...
with an emphasis on building its trading operations. To bolster its trading initiative, in 1992, SBC acquired O'Connor & Associates
O'Connor & Associates
O'Connor & Associates was a Chicago-based options trading firm, with particular emphasis on financial derivatives. The firm was acquired by Swiss Bank Corporation O'Connor & Associates was a Chicago-based options trading firm, with particular emphasis on financial derivatives. The firm was...
, a Chicago-based options trading firm, with an expertise in financial derivatives. O'Connor
O'Connor & Associates
O'Connor & Associates was a Chicago-based options trading firm, with particular emphasis on financial derivatives. The firm was acquired by Swiss Bank Corporation O'Connor & Associates was a Chicago-based options trading firm, with particular emphasis on financial derivatives. The firm was...
was founded in 1977 by mathematician Michael Greenbaum and was named for Edmund (Ed) and Williams (Bill) O'Connor. The O'Connor brothers had made a fortune trading grain on the Chicago Board of Trade
Chicago Board of Trade
The Chicago Board of Trade , established in 1848, is the world's oldest futures and options exchange. More than 50 different options and futures contracts are traded by over 3,600 CBOT members through open outcry and eTrading. Volumes at the exchange in 2003 were a record breaking 454 million...
and founded a First Options, a clearing house
Clearing house (finance)
A clearing house is a financial institution that provides clearing and settlement services for financial and commodities derivatives and securities transactions...
business. The O'Connors provided Greenbaum, who had run risk management for First Options, with the capital to start his own firm. SBC had established a strategic relationship with O'Connor
O'Connor & Associates
O'Connor & Associates was a Chicago-based options trading firm, with particular emphasis on financial derivatives. The firm was acquired by Swiss Bank Corporation O'Connor & Associates was a Chicago-based options trading firm, with particular emphasis on financial derivatives. The firm was...
, which was the largest market maker
Market maker
A market maker is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. From a market microstructure theory standpoint, market makers are net sellers of an option to be...
in the financial options exchanges in the U.S., beginning in 1988. O'Connor had been looking to partner with a larger financial institution and in 1989 entered into a currency joint venture with SBC that proved to be the first step towards a sale of O'Connor to SBC. Following the merger, O'Connor was combined with SBC's money market
Money market
The money market is a component of the financial markets for assets involved in short-term borrowing and lending with original maturities of one year or shorter time frames. Trading in the money markets involves Treasury bills, commercial paper, bankers' acceptances, certificates of deposit,...
, capital market
Capital market
A capital market is a market for securities , where business enterprises and governments can raise long-term funds. It is defined as a market in which money is provided for periods longer than a year, as the raising of short-term funds takes place on other markets...
and currency market activities to form a globally integrated capital markets and treasury operation. A number of O'Connor executives were brought into key positions within the bank in an attempt to cultivate a more entrepreneurial culture at SBC.
In 1994, SBC followed up its acquisition of O'Connor by acquiring Brinson Partners an asset management firm focused on providing access for U.S. institutions to global markets. Founded by Gary P. Brinson, an innovator in financial management, Brinson Partners had emerged as one of largest managers of pension plans and also managed a series of mutual funds. Brinson was a pioneer in the development of the theory of asset allocation
Asset allocation
Asset allocation is an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investors risk tolerance, goals and investment time frame.-Description:...
which had largely become conventional wisdom among money managers in the 1980s and 1990s. Brinson had begun working at First Chicago Corporation in the 1970s and by 1981 began building the business that would become Brinson Partners. In 1989, Brinson led a $100 million management buyout
Management buyout
A management buyout is a form of acquisition where a company's existing managers acquire a large part or all of the company.- Overview :Management buyouts are similar in all major legal aspects to any other acquisition of a company...
of his firm from First Chicago Corporation and over the next five years built up the firm to approximately $36 billion of assets under management. SBC paid $750 million to acquire Brinson Partners, which resulted in a profit to Brinson and his partners of $460 million on the sale of their 75% stake in the company. Following the acquisition of Brinson Partners, Gary Brinson ran SBC's asset management business and after the merger with UBS, Brinson was named chief investment officer of UBS Global Asset Management.
SBC's next made a major push into investment banking with the acquisition of S.G. Warburg & Co. a leading British investment banking firm in 1995 for $1.4 billion. S.G. Warburg was founded by Siegmund Warburg, a member of the Warburg banking family
Warburg family
The Warburg family is a financial dynasty of German Jewish origin, noted for their accomplishments in physics, classical music, art history, pharmacology, physiology, finance, private equity and philanthropy. They are believed to be descended from the Venetian Jewish del Banco family, in the early...
. After World War II, S.G. Warburg established a reputation as a daring merchant bank
Merchant bank
A merchant bank is a financial institution which provides capital to companies in the form of share ownership instead of loans. A merchant bank also provides advisory on corporate matters to the firms they lend to....
that grew to be one of the most respected investment banks in London. Following a flawed and costly expansion into the US, in 1994 a merger was announced with Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
, but the talks collapsed. The following year S.G. Warburg was purchased by Swiss Bank Corporation,. The bank merged S.G. Warburg with its own existing investment banking unit to create SBC Warburg, which became a leading player in global investment banking.
Two years later, in 1997, SBC paid $600 million to acquire Dillon, Read & Co.
Dillon, Read & Co.
Dillon, Read & Co. was a prominent American investment bank from the 1920s into the 1960s.-Origins:Dillon Read traces its roots to 1832 with the founding of the Wall Street brokerage firm Carpenter & Vermilye. This firm was succeeded by Read & Company in which chief principal was William A. Read. ...
, a white shoe U.S. investment banking firm considered to be a member of the bulge bracket
Bulge bracket
The bulge bracket comprises the "big banks," the world's largest and most profitable multi-national investment banks.- Technical meaning :The term 'bulge bracket' refers to the first group of investment banks listed on the "tombstone" notifying the public of a financial transaction or deal...
. Dillon, Read, which traced its roots to the 1830s was among the powerhouse firms on Wall Street in the 1920s and 1930s and by the 1990s had a particularly strong mergers and acquisitions
Mergers and acquisitions
Mergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
advisory group. Dillon Read had been in negotiations to sell itself to ING
ING Group
The ING Group is a global financial institution offering retail banking, direct banking, commercial banking, investment banking, asset management, and insurance services. ING is the Dutch member of the Inter-Alpha Group of Banks, a cooperative consortium of 11 prominent European banks...
which owned 25% of the firm already, however Dillon Read partners balked at ING's integration plans. After its acquisition by SBC, Dillon Read was merged with SBC-Warburg to create SBC-Warburg Dillon Read. The Dillon Read name was discontinued after the merger with Union Bank of Switzerland
Union Bank of Switzerland
Union Bank of Switzerland was a large integrated financial services company located in Switzerland. The bank, which at the time was the second largest bank in Switzerland, merged with Swiss Bank Corporation in 1998, to become UBS to form what was then the largest bank in Europe and the second...
although it was brought back in 2005 as Dillon Read Capital Management, UBS's ill-fated hedge fund operations.
Merger with Union Bank of Switzerland
While SBC was aggressively pushing ahead its various acquisitions, UBS was mired in a series of entanglements with activist shareholders who were critical of bank's relatively conservative management. Martin Ebner, through his investment trust, BK Vision became the largest shareholder in UBS and attempted to force a major restructuring of the bank’s operations. The groundwork for the merger of SBC and UBS was actually laid by their mutual competitor, Credit SuisseCredit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
which had approached UBS about a merger that would have created the second largest bank in the world in 1996. UBS's management and board unanimously rebuffed the proposed merger. Ebner, who supported the idea of a merger, led a major shareholder revolt that resulted in the replacement of UBS's chairman, Robert Studer. Studer's successor Mathis Cabiallavetta would be one of the key architects of the merger with SBC.
On December 8, 1997, Union Bank of Switzerland
Union Bank of Switzerland
Union Bank of Switzerland was a large integrated financial services company located in Switzerland. The bank, which at the time was the second largest bank in Switzerland, merged with Swiss Bank Corporation in 1998, to become UBS to form what was then the largest bank in Europe and the second...
and SBC announced an all stock merger. At the time of the merger, Union Bank of Switzerland and Swiss Bank Corporation were the second and third largest banks in Switzerland, respectively, both trailing Credit Suisse
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
. Discussions between the two banks had begun several months earlier, less than a year after rebuffing Credit Suisse
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
's merger overtures.
The all-stock merger resulted in the creation UBS AG
UBS AG
UBS AG is a Swiss global financial services company headquartered in Basel and Zürich, Switzerland, which provides investment banking, asset management, and wealth management services for private, corporate, and institutional clients worldwide, as well as retail clients in Switzerland...
, a huge new bank with total assets of more than $590 billion. Also referred to as the "New UBS" to distinguish itself from the former Union Bank of Switzerland, the combined bank became the second largest in the world, at that time, behind only the Bank of Tokyo-Mitsubishi. Additionally, the merger pulled together the banks' various asset management businesses to create the world's largest money manager, with approximately $910 billion in assets under management
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
.
The merger, which was billed as a merger of equals, resulted in SBC's shareholders receiving 40% of the bank's common shares and Union Bank's shareholders receiving 60% of the combined company. SBC's Marcel Ospel
Marcel Ospel
Marcel Louis Ospel was a former Chairman of the Board of Directors of UBS AG, the largest bank in Switzerland.Marcel Ospel had an income in 2005 of around 24 million CHF....
was named chief executive officer while Union Bank's Mathis Cabiallavetta
Mathis Cabiallavetta
Mathis Cabiallavetta is a director of Philip Morris International and BlackRock.Mr. Cabiallavetta is Chairman of Marsh & McLennan Companies and a member of MMC International's Advisory Board. Prior to joining MMC in 1999, Mr. Cabiallavetta was Chairman of the Board of Union Bank of Switzerland,...
became chairman of the new bank. However, it quickly became evident that from a management perspective, it was SBC that was buying UBS as nearly 80% of the top management positions were filled by legacy Swiss Bank professionals. Additionally, UBS professionals suffered more headcount reductions, particularly in the investment banking unit where there were heavy cuts in the corporate finance and equities businesses. Prior to the merger, Swiss Bank Corporation had built a global investment banking business, Warburg Dillon Read
Warburg Dillon Read
Warburg Dillon Read was an investment bank created by the Swiss Bank Corporation , following its 1997 acquisition of S. G. Warburg & Co. which it merged with Dillon, Read & Co., a firm it had acquired in 1995. SBC itself merged with the Union Bank of Switzerland in 1998, creating UBS AG...
through its acquisitions of Dillon Read in New York and S.G. Warburg in London. SBC was generally considered to be further along than UBS in developing its international investment banking business, particularly in the higher margin advisory businesses where Warburg Dillon Read
Warburg Dillon Read
Warburg Dillon Read was an investment bank created by the Swiss Bank Corporation , following its 1997 acquisition of S. G. Warburg & Co. which it merged with Dillon, Read & Co., a firm it had acquired in 1995. SBC itself merged with the Union Bank of Switzerland in 1998, creating UBS AG...
was considered to be the more established platform.
After the merger was completed, it was widely speculated that a series of losses suffered by UBS on its equity derivative
Equity derivative
In finance, an equity derivative is a class of derivatives whose value is at least partly derived from one or more underlying equity securities. Options and futures are by far the most common equity derivatives, however there are many other types of equity derivatives that are actively...
positions in late 1997 provided SBC with the leverage it required to consummate the merger. It would become clear that the derivatives losses prompted UBS to accept the terms proposed by SBC more readily than they otherwise would have.
After the merger
In November 2000, UBS merged with Paine Webber an American
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
stock broker
Stock broker
A stock broker or stockbroker is a regulated professional broker who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors...
age and asset management firm led by chairman and CEO, Donald Marron
Donald Marron
Donald B. Marron is a financier, private equity investor and entrepreneur, notable as the chairman and chief executive officer of brokerage firm Paine Webber from 1980 through the sale of the company in 2000, as well as the founder of private equity firm Lightyear Capital and of Data Resources...
. The acquisition pushed UBS to the top Wealth and Asset Management Firm in the world. Initially the business was given the divisional name "UBS PaineWebber" but in 2003 the 123-year-old name Paine Webber disappeared when it was renamed "UBS Wealth Management USA."
The bank would grow considerably in the 2000s, building a large investment banking franchise to compete with the major U.S. and European bulge bracket firms. However, UBS suffered major setbacks in 2007, 2008 and 2009. UBS suffered among the largest losses of any European bank during the subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
and the bank was required to raise large amounts of outside capital from the Government of Singapore Investment Corporation
Government of Singapore Investment Corporation
The Government of Singapore Investment Corporation Private Limited is a sovereign wealth fund established by the Government of Singapore in 1981 to manage Singapore's foreign reserves...
, the Swiss government and through a series of equity offerings in 2008 and 2009.
Acquisition history
Swiss Bank Corporation, prior to its merger with Union Bank of SwitzerlandUnion Bank of Switzerland
Union Bank of Switzerland was a large integrated financial services company located in Switzerland. The bank, which at the time was the second largest bank in Switzerland, merged with Swiss Bank Corporation in 1998, to become UBS to form what was then the largest bank in Europe and the second...
was the result of the combination of dozens of individual firms, many of which date to the 19th century. The following is an illustration of the company's major mergers and acquisitions and historical predecessors, although this is not necessarily a comprehensive list:
See also
- UBS, successor following merger with Union Bank of SwitzerlandUnion Bank of SwitzerlandUnion Bank of Switzerland was a large integrated financial services company located in Switzerland. The bank, which at the time was the second largest bank in Switzerland, merged with Swiss Bank Corporation in 1998, to become UBS to form what was then the largest bank in Europe and the second...
- Banking in SwitzerlandBanking in SwitzerlandAll banks in Switzerland are regulated by Swiss Financial Market Supervisory Authority , which derives its authority from a series of federal statutes...