Swiss Bank Corporation

**Swiss Bank Corporation**
	Banking; Financial services; Investment services
Predecessor	Bankverein (1854–1872); Basler Bankverein (1872–1895); Basler & Zürcher Bankverein (1895)
Founded	1854; 170 years ago
Defunct	1998
Fate	Merged with Union Bank of Switzerland to form UBS
Successor	UBS
Headquarters	Basel, Switzerland

Swiss Bank Corporation was a Swiss investment bank and financial services company located in Switzerland. Prior to its merger, the bank was the third largest in Switzerland, with over CHF 300 billion of assets and CHF 11.7 billion of equity.^[1]

Throughout the 1990s, SBC engaged in a large growth initiative, shifting its focus from traditional

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

UBS Investment Bank

.

History

Basel, Switzerland, offices of Swiss Bank Corporation c.1920^[2]

1872 Basler Bankverein investor prospectus

Swiss Bank Corporation traces its history to 1854. In that year, six private banking firms in

Swiss Verein) was driven by the industrialization of the country and the construction of railroads in the mid-19th century.^[5]

The Basler Bankverein was formally organized in 1872 in Basel, replacing the original Bankverein consortium. Basler Bankverein was founded with an initial commitment of CHF 30 million, of which CHF 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.^[3] By 1879, Basler Bankverein has accumulated enough capital to resume dividends, initially at an 8% annual rate and then increasing to 10% in 1880.^[4]

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).^[4] The English name of the bank was changed to Swiss Bank Corporation in 1917.^[3]

1900–1939

St. Gallen, Switzerland, offices in Swiss Bank Corporation c.1920^[2]

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

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.^[4]

The onset of

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 CHF 1.6 billion to its 1918 levels of CHF 1 billion by 1936.^[4]

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

.

Activities in World War II

On the eve of World War II, 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.^[6] 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.^[7] During the war, the bank's traditional business fell off and the Swiss government became its largest client.^[3] 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.^[8]

In 1997, the

Long Term Capital Management collapse in 1998 brought a degree of closure to the issue.^[11]^[12]^[13]

1945–1990

Swiss Bank Corporation found itself in relatively strong financial condition at the end of World War II, with CHF 1.8 billion of assets.[4] 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.^[3] 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.^[14]

Basel, Switzerland

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 CHF 4 billion by the end of the 1950s and doubled assets again by the mid-1960s, exceeding CHF 10 billion in 1965.^[4] SBC acquired Banque Populaire Valaisanne, Sion, Switzerland, and the Banque Populaire de Sierre. The firm continued to open new offices in the US 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).^[15] 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.^[4]

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 CHF 74 billion of assets, the bank would typically rank second to UBS which firmly established itself as the largest Swiss bank in the 1980s.

Schweizerische Volksbank and Winterthur Group.^[4]

Aggressive acquisitions (1990–1998)

Fifth Avenue in New York City opened in 1990.^[16]

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 Switzerland. 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 US, Japan, Germany and the UK. The bank signaled its new posture in 1990 when it opened its new US headquarters, Swiss Bank Tower, a 29 floor building on 49th Street, adjoining Saks Fifth Avenue.^[16]

SBC shifted its focus from traditional

currency market activities to form a globally integrated capital markets and treasury operation.^[17] 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.^[21]

SBC acquired Gary P. Brinson's Brinson Partners in 1994 to bolster the bank's US asset management business.

In 1994, SBC followed up its acquisition of O'Connor by acquiring Brinson Partners an asset management firm focused on providing access for US institutions to global markets.

UBS Global Asset Management.^[26]

Warburg Dillon Read

.

SBC's next made a major push into investment banking with the acquisition of

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.^[27] Following a flawed and costly expansion into the US, in 1994 a merger was announced with Morgan Stanley, but the talks collapsed.^[28] The following year S.G. Warburg was purchased by Swiss Bank Corporation.^[29] 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.^[22]

Two years later, in 1997, SBC paid US$600 million to acquire

Dillon Read Capital Management

, UBS's ill-fated hedge fund operations.

Merger with Union Bank of Switzerland

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.^[32] 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.^[33] The groundwork for the merger of SBC and UBS was actually laid by their mutual competitor, Credit Suisse which had approached UBS about a merger that would have created the second largest bank in the world in 1996.^[34] UBS's management and board unanimously rebuffed the proposed merger.^[35] Ebner, who supported the idea of a merger, led a major shareholder revolt that resulted in the replacement of UBS's chairman, Robert Studer.^[36]

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.^[37] Discussions between the two banks had begun several months earlier, less than a year after rebuffing Credit Suisse's merger overtures.^[38]

The all-stock merger resulted in the creation

Bank of Tokyo-Mitsubishi.^[39] Additionally, the merger pulled together the banks' various asset businesses to create the world's largest money manager, with approximately US$910 billion in assets under management.^[39]

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

Warburg Dillon Read was considered to be the more established platform.^[42]^[43]

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.^[44]^[45] It would become clear that the derivatives losses prompted UBS to accept the terms proposed by SBC more readily than they otherwise would have.^[46]

After the merger

UBS Investment Bank's trading operations, the Stamford complex featured the largest trading floor ever built, roughly the size of two football fields. Following an expansion in 2002, the floor covers 103,000-square-foot (9,600 m²) with 40-foot (12 m) arched ceilings.^[48]

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,

stock brokerage and asset management firm led by chairman and CEO, Donald Marron.^[49]^[50]^[51] 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."^[52]

The bank would grow considerably in the 2000s, building a large investment banking franchise to compete with the major US and European bulge bracket firms. However,

Government of Singapore Investment Corporation,^[53] the Swiss government^[54]

and through a series of equity offerings in 2008 and 2009.

Acquisition history

Swiss Bank Corporation, prior to its merger with Union Bank of Switzerland 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:^[55]

Swiss Bank Corporation
(merged 1977)

Swiss Bank Corporation
(merged 1897)

Basler & Zürcher Bankverein

(est. 1880)

	Basler Bankverein (est. 1856 as Bankverein, renamed in 1872)

	Zürcher Bankverein (est. 1889)

Basler Depositenbank
(est. 1882)

Schweiz Unionbank
(est. 1889)

Basler Handelsbank
(est. 1862, acq. 1945)

O'Connor
(est. 1977, acq. 1992)

Brinson Partners
(est. 1989 originally division of

First Chicago Corporation

started c. 1981, acq. 1994)