UBS AG

UBS AG is one of the two largest banks in Switzerland, the other is Credit Suisse. The TLA originally stood for Union Bank of Switzerland. However, after the merger with SBC (Swiss Bank Corporation), the combined entity was called UBS AG and the abbreviation is no longer expanded on any corporate documents. AG stands for Aktiengesellschaft, the german word for a joint stock company. The bank has joint headquarters in Basel and Zurich.

UBS's strength continues to be its private banking business in Switzerland, where it is a leading proponent of the Swiss-style of wealth management. This involves conservative, diversified investment and highly personalized service. All of this comes with a high price tag, but the Swiss banks have been able to offer some tax advantages that have made it attractive to their wealthier clients. The tax management part of the business is however slowly dying out as the EU/US get increasingly smarter with tax evaders and the European Union becomes more integrated.

UBS is more of a diversified financial services group rather than a pure retail/commercial (your neighbourhood bank with ATMs) or private bank (heavy oak desks, vaults full of gold and jewels). It has an investment banking unit, a venture capital group, a wealth management arm, and a mutual funds group. This is keeping with the larger trend within the financial industry towards global, full service banks. UBS has been actively marketing itself as a global financial institution for a number of years, and has maintained an active presence in Asia, Australia and Latin America.

In 2001, UBS AG had operating income of CHF 36 billion and operating profit (before tax) of CHF 10.6 billion (approximately USD 7 bn). Market cap was CHF 112 billion, assets under management topped CHF 1.4 trillion and its long-term credit rating was AAA. Shares are listed for trading on the Swiss Stock Exchange, New York Stock Exchange and Tokyo Stock Exchange. The bank has over 70,000 employees (30,000 in Switzerland and 29,000 in the US) and offices in more than 50 countries.

The name Union Bank of Switzerland was chosen in 1912 for a Zurich based entity resulting from the merger between Bank in Winterthur (Winterthur, 1862-1912) and Toggenburger Bank (Lichtenstein, 1863-1912). SBC has an older history, and had headquarters in Basel. Bankverein was created in 1854, renamed to Basler Bankverein in 1872, and finally to Sschweizerische Bankverein (SBC) in 1897. Throughout, SBC retained its headquarters in Basel.

Over the years, the bank has expanded and grown through acquisitions and mergers. By 1998, SBC had acquired Basler Handelsbank (1862-1945), Ferrier Lullin & Cie. (Geneva, 1795-1978), O'Connor Associates (Chicago, 1977-1992), S.G. Warburg & Co. (London, 1934-1995), Brinson Partners (Chicago, 1980-1995), Dillon Read & Co. (New York, 1832-1997). Over the years, UBS acquired Phillips & Drew (London, 1896-1986), Cantonal Bank of Appenzell-Ausserrhoden (Herisau, 1877-1996), Eidgenossiche Bank also known as Bank Federale (Zurich, 1945).

Paine Webber (New York, 1879-2000) and Enron's energy trading unit (Houston, 1990s-2002) were acquired by UBS AG. The Paine Webber acquisition was a major one, and gave UBS AG a major presence in the US, something it had not been able to achieve previously.

The merger between UBS and SBC in 1998 was the most important. In essence, UBS (the larger firm) was acquired by SBC after it had suffered large losses (to the tune of several hundred million dollars) in its trading portfolios. SBC was considered to be the more nimble, more international firm. The whole episode required a complete re-engineering of risk management at UBS and the departure of many senior managers. Within Switzerland, the merger was read as a victory for a Basel corporation (German influence) over an ambitious Zurich (traditional Swiss) firm. A similar claim can be made for the demise of Swissair and its acquisition by Crossair.

In 2000, UBS AG was one of the Swiss corporations to settle a class action lawsuit in the US District Court, New York for a combined USD 1.25 billion. The fund was created to compensate holocaust victims for economic harm done to them by Swiss entities. Details of a number of dormant accounts from World War II were made public so beneficiaries could claim funds deposited by relatives who perished during the war. This event was one of a series that have shaken the Swiss banking industry, and forced it to re-evaluate its history and practises. Swiss banks an dthe Swiss authorities are increasingly cracking down on money laundering and other financial crimes.