The prospects for the United Bank of Switzerland, the combination of two leading Swiss banks that was proposed yesterday, rest heavily on whether it can be successful in the North American investment, securities and banking businesses.
For Union Bank of Switzerland and the Swiss Bank Corporation, their proposed merger reflects the latest European effort to compete with Wall Street rivals like Merrill Lynch & Company and the Travelers Group. To do so, the Swiss behemoth must increase its presence on its rivals' home turf, which has the world's largest financial and investment markets.
The United States is also where most important financial innovations of recent years have occurred. And it is where the Swiss giant will base its asset management business, which, according to one financial adviser, will acccount for as much as half the new bank's revenue.
The global investment management business will be in Chicago, to be run by Gary P. Brinson of Brinson Partners, the money management firm acquired by Swiss Bank in 1994.
With combined assets of $916 billion under management, the huge new bank would be the world's biggest manager of assets, even outstripping such giants as Fidelity Investments of Boston. Warburg Dillon Read, the merged bank's investment banking division, is to be based in London.
Yesterday, the two Swiss banks said they intended to increase their share of equity and high-yield bond businesses in North America.
The mergers and acquisitions that have swept the international financial business in recent years spurred their merger talks. This year alone, Swiss financial institutions have been combining to try to maintain their might: Zurich Group bought control of Scudder Stevens & Clark, the investment manager, after its acquisition last year of the Kemper Corporation, the Chicago financial firm; Credit Suisse, Switzerland's second-largest bank, after Union Bank of Switzerland, recently combined with Winterthur, a Swiss insurer.
They are all just trying to keep up with their American rivals. Travelers Group just merged its Smith Barney brokerage firm with Salomon Inc., the most recent of more than 10 Wall Street mergers this year. American banks have bought into investment banking, and brokerage firms have combined with one another, all in pursuit of size and scope to maintain market position and profitability.
Indeed, Bruce Wasserstein, of Wasserstein & Perella, who advised Swiss Bank on the combination announced yesterday, said that the merger of Morgan Stanley and Dean, Witter, Discover & Company in February -- creating Morgan Stanley, Dean Witter, Discover & Company -- helped prompt his client to review its strategic options.
''Like the Morgan Stanley deal, this has just fractured the structure of worldwide banking,'' Mr. Wasserstein said yesterday, discussing the new Swiss company. ''The aftershocks will be tremendous. The battle is on for global leadership.''
The combined bank intends to cut its fixed costs to make itself more competitive. It plans to reduce its worldwide work force by about 25 percent over several years -- or as many as 13,000 people -- to 43,000. Those cuts are expected to include 7,000 job losses in Switzerland and 6,000 in other markets.
The two banks have almost 6,00 jobs in the United States; spokesmen for the banks would not say yesterday how many might be lost. Analysts speculated that more than 2,000 jobs -- at the banks' operations in New York City and Stamford, Conn. -- might face elimination as the companies consolidate and sell unwanted businesses.
There was speculation yesterday that a number of investment banking jobs in North America would be cut. Matthias Beckmann, a spokesman for Swiss Bank, said that the new company planned to cut 6,000 from its combined worldwide investment-banking work force of 20,000. Many of those cuts are expected to occur in London and New York. Stamford is expected to remain the principal office for the combined firm in North America, he said.
The merger partners, though long established in North America, have grown rapidly in recent years. Swiss Bank, which is generally held to be further along than UBS in developing an international investment banking business, has in recent years acquired Brinson Partners; O'Connor, a derivatives business, and Dillon, Read, a Wall Street investment bank, as it sought to build its American business.
Mr. Brinson, who is 54 and hails from Seattle, sold his firm, Brinson Partners, to Swiss Bank in 1994 for an estimated $750 million. He is expected to play the leading role in helping to organize the $916 billion that a United Bank of Switzerland would have under management.
''He's going to run 50 percent of the combined business,'' one adviser said yesterday, underlining Mr. Brinson's pivotal role.
John Keefe, an independent analyst at Keefe Worldwide Information Services, a New York consulting firm, charted Mr. Brinson's rise. ''Ten years ago, he was the head of a midsized investment arm of a bank in Chicago,'' he said. ''Now he's one of the top officers of one of the largest financial institutions in the world running one of its most important divisions.''
The son of a railroad construction worker, Mr. Brinson progressed rapidly in the money management business. After graduate studies in finance, Mr. Brinson worked for Travelers, the insurance company, in Hartford, rising quickly to become chief executive of Travelers Investment Management Company. In 1979, he moved to First Chicago, where, a decade later, he organized the buyout of the firm's asset management business.
That business became Brinson Partners, which in turn became SBC Brinson. Now, it is the projected basis for the international asset management business of the proposed United Bank of Switzerland.