UBS, Switzerland's biggest bank, has agreed to sell its SBC Wealth Management division to rival Julius Bär in a deal valued at SFr5.6 billion ($4.6 billion).
With SFr270 billion in assets, the Bär group will become the country's largest institution concentrating solely on asset management and private banking.
Bär, the largest listed mid-sized bank in Switzerland, said it would fund the purchase mostly by a share issue, with UBS taking a 21.5 per-cent stake in the enlarged group.
SBC Wealth Management includes three small private banks: Geneva-based Ferrier Lullin & Cie, Zurich-based Ehinger & Armand von Ernst and Lugano-based Banca di Lugano, as well as fund manager, GAM.
The private banks will adopt the Julius Bär brand name. GAM will continue to be marketed as an independent brand.
The deal will create a domestic powerhouse in Switzerland, home to the world's largest offshore banking industry, and is likely give growth-strapped Bär the mass it needs to weather a downturn among small- and mid-sized wealth managers.
"This acquisition is the next logical step within our growth strategy," said Bär group chairman Raymond J. Bär in a statement.
"It paves the way for sustainable independence and further profitable growth [...] by giving it a distinct position in the financial industry as Switzerland's largest pure-play wealth manager."
The sale will give UBS a pre-tax capital gain of SFr3.5 billion and allow the group to focus on its banking activities that carry the UBS name. SBC Wealth Management was notable within the UBS group because it had remained semi-autonomous and independently branded.
The bank said after analysing various options it had come to the conclusion that the sale was in the best interest of all stakeholders.
UBS executive Hans de Gier is to become chief executive of the new group, the banks said.
Bär would be Switzerland's largest group of domestically-based banks, with assets under management of SFr270 billion, putting it ahead of unlisted rival Pictet & Cie, with SFr249 billion, and Lombard Odier Darier Hentsch, which last reported SFr127 billion in assets at the end of 2004.
Banks such as Bär or rival Sarasin have faced difficulties since the stock market bubble burst in 2001. Since then, customers have favoured big groups with global reach, like UBS.
By integrating the three private banks and GAM, Bär management hope to increase the group's financial strength and profitability substantially. Assets under management are expected to grow by approximately 80 per cent with revenues doubling and net profit almost tripling.
The group expects to generate significant savings with the integration of the different back-office operations and the streamlining of staff functions, with redundancies ultimately reaching approximately ten per cent of the combined workforce.
Bär currently employs around 1,800 people. SBC Wealth Management has 1,700 employees.
Job cuts over the next two years will partially be realised through early retirement agreements and natural attrition. Julius Bär expects to achieve annual cost savings of more than SFr100 million by 2008.
swissinfo with agencies
UBS is selling its private banking division to Bank Julius Bär for SFr5.6 billion.
Julius Bär will hand over SFr3.8 billion in cash, funds raised via a share issue.
The group will manage assets worth SFr270 billion.
UBS expects a pre-tax profit of SFr3.5 billion from the sale.
Julius Bär expects to cut ten per cent of its total workforce once the the purchase is completed.