Two Largest Swiss Banks Discuss Merger

Switzerland’s two biggest banks--Union Bank and CS Holding--said Tuesday they are weighing a merger that would create another worldwide banking behemoth.

The board of No. 1 Union Bank of Switzerland will decide this week whether to pursue the pitch from CS Holding.

A combination of the two worldwide banking companies would create a global force in securities and banking. But there was no indication whether the companies were contemplating combining some subsidiaries or an across-the-board fusion.

“It would be an interesting combination,” said Mike Moran, a partner at the New York firm of KPMG Peat Marwick. “It certainly would have a lot of reach globally.”

Moran said that in the United States alone both banks have significant securities operations “and I would expect they would want to expand them.”

UBS spokeswoman Gertrud Erismann-Peyer said the UBS board of directors will decide at a meeting Thursday evening whether to pursue the proposal.

CS Holding’s stock rose 5.75% Tuesday. Trading in UBS, which has two classes of shares, was mixed.

CS Holding, the parent of Credit Suisse and CS First Boston Group Inc., said its chairman, Rainer Gut, had broached the merger to his UBS counterpart, Nikolaus Senn. Erismann-Peyer said the conversation took place last week.

Gut asked Senn “if it wouldn’t be proper to discuss the possibility of a merger of the two largest Swiss banking houses” in view of developments in international and Swiss banking, the CS statement said.

CS Holding confirmed the proposal first reported by the Zurich daily Tages-Anzeiger, but the banking group denied that Gut had issued an ultimatum to Senn.

The newspaper said Gut told Senn that if UBS refused to merge, CS Holding and its allies would vote against UBS’ management at the bank’s April 16 shareholder meeting, when Senn is due to retire. CS Holding denied the threat.

The proposal follows a series of major banking mergers in the United States and Japan.

Bank of Tokyo and Mitsubishi recently finished their combination into the world’s biggest banking company and, on a smaller scale, California’s Wells Fargo bought First Interstate Bankcorp and New York’s Chemical Banking Corp. merged with Chase Manhattan.

Switzerland’s regulatory bodies would have little power to block a merger, but widespread political opposition in Switzerland could develop if there was a prospect of mass layoffs in the country’s important banking sector.

Just last month Switzerland was shocked by plans to merge two Swiss drug groups, Ciba-Geigy and Sandoz.

The pending drug merger has caused alarm in Switzerland because it is expected to eliminate 10,000 jobs, a third of them in Switzerland. The cutback would represent about a tenth of the total payroll of the two companies.

UBS has 29,000 employees, 7,000 of them outside Switzerland. CS Holding has 53,000 employees, but a domestic and international breakdown was unavailable.

The two groups have similar holdings in financial services, insurance and electric utilities.