[A-List] City of London modernisation

["Michael Keaney" <michael.keaney@xxxxxx>]

Globalisation kills off Warburg name
UBS consigns venerable City name to the corporate dustbin as it becomes a
single worldwide brand
By William Kay, Personal Finance Editor
The Independent, 13 November 2002

When Warburg, then one of the City's top merchant banks, was taken over by
Swiss Bank Corporation in 1995, the chairman Sir David Scholey said the deal
was "like the clunk of a Rolls-Royce door". Yesterday the Warburg name was
consigned to the corporate dustbin like the clunk of a tin can on a rubbish
dump, as it became the latest in a long line of venerable City names to be
ditched in the remorseless move towards globalisation in the financial
world.

The Zurich-based UBS, Warburg's present parent, said: "From the second half
of 2003, our businesses will be represented by the single UBS brand. The
firm will no longer market its services using the UBS Warburg or UBS
PaineWebber brands. The move to a simpler branding accurately reflects UBS's
integrated business model and the 'one firm' approach UBS delivers to its
clients."

One of the saddest, if symbolic, comments on the demise of Warburg, one of
the most illustrious names in the City in the past 50 years, is that it does
not even merit a Swiss franc's write-off in the books of UBS. In contrast
PaineWebber, the US broker whose name was also erased yesterday, ranks as "a
significant financial event" and is costing UBS 1bn Swiss francs (£450m).
The reason is that as Warburg was taken over seven years ago the value of
its name has long since been written down to zero, but the contrast is
telling.

Marcel Ospel, UBS's chairman, said: "UBS has emerged as one of the world's
flagship financial institutions. We need a flagship brand."

John Costas, UBS Warburg's US-born chairman and chief executive officer,
added: "We have done a lot of research with thousands of clients in 40
countries, and asked them what is the optimum brand structure. That research
overwhelmingly pointed to one brand, with the greater efficiencies and
impact that would result, and UBS tested best in terms of familiarity and
being a trusted adviser. I have a lot of empathy for the emotional
attachment and the long history of the Warburg brand, especially in the
City. But remember, a lot of New York broking and banking names have gone,
too. In any decision there are pros and there are cons. Losing the name in
London was a negative, but having a global brand was a positive."

Similar calculations have been made by many foreign parents ever since the
Thatcher government forced the London Stock Exchange to open its doors to
foreign ownership in 1986 - the so-called Big Bang. US and European banks
rushed to buy their slice of the City, to get their hands on a pool of
traders and corporate financiers operating in the middle of the global time
zones, just five hours ahead of New York and eight hours behind Tokyo.

Stanislas Yassukovitch, then London head of Merrill Lynch, America's biggest
broker and later deputy chairman of the London Stock Exchange, said at the
time: "Clearly Big Bang and everything associated with it is designed to
produce a securities market that will bear quite a close similarity to the
US. The US houses are going to have a major competitive advantage which will
more than compensate for the disadvantages we have - not being indigenous,
not having the traditional roots of the domestic operators. Bluntly, your
guys have been playing cricket and they are going to have to learn how to
play baseball."

Yesterday Mr Yassukovitch said: "You have to wonder, considering the amount
of goodwill people pay when they make these acquisitions, how much value
they are destroying in getting rid of such a brand. Warburg is one of the
most celebrated names in the history of merchant banking. It is unbelievably
irresponsible, amounting to corporate vandalism. UBS must be signalling that
the London presence is less important."

John Littlewood, an ex-stockbroker who worked for Warburg, recalls in his
book The Stock Market - 50 Years of Capitalism at Work : "The likes of SG
Warburg faced a catch-22 question - that an acquisition in the US, to be
worthwhile, would have to be of a size that would compromise its British and
European identity. The alternative was to seek shelter under the umbrella of
the capital resources of a parent European universal bank but, in the
process, be swamped by size.

"These European banks correctly judged that the business skills in financial
services lay largely in London, and they used their capital resources to
acquire these skills. London is where the concentration of international
banks and investment houses is at its greatest, and where the location,
language, communications infrastructure, deregulation and native skills
guarantee its future, but its ownership is now heavily Continental. Location
is far more important than ownership. It is in the British interest that,
within the European time zone, the actual location of the securities and
investment banking businesses remains in the City of London."

Others are more philosophical. Sir David Scholey, who is now chairman of
Close Brothers, one of the few remaining independent British investment
banks, said: "I don't think of it as demise, I think of it as an
historically natural move. There is obviously a tinge of sadness when one
sees the name of Warburg going, but quite a few others have gone too. Many
of us have Warburg engraved on our hearts, but the business is still alive
and thriving. Last month we celebrated the centenary of Siegmund Warburg's
birth, and that was a graceful lowering of his personal flag."

More prosaically, one of the last of the old-style market-makers, Brian
Winterflood of Winterflood Securities, said: "It's awful, isn't it, but it's
inevitable. At one stage we all hope that all these international names
would come under our umbrella, but it's turned out the other way round. We
are all becoming like McDonald's and Starbucks, but the fact is that the
cottage industry in share-dealing that existed before Big Bang has been seen
in its true perspective - as just that."

And Jamie Hambro, part of the Hambro family that broke away from its
now-subsumed merchant bank to go into fund management, said: "I knew Siggy
Warburg and he must be spinning in his grave. But I don't think you can be
sentimental: the way the market is going, the world is dividing into the big
names like UBS and the one-off boutiques. Maybe our name doesn't have the
same brand recognition it used to, but we just have to build it up again."

In the years immediately after Big Bang, there was a view that it did not
matter who owned the City's banks and securities houses as long as they
stayed in London, but that is being replaced by a fear that the
entrepreneurial character of the City is vanishing as the old-style
partnerships become part of multinational corporations.

Mr Yassukovitch said: "Innovation flourished more easily when the
decision-making process was in London and you didn't have to go through too
many layers of management. Now you have to work your way through a whole
series of layers of decision-making, and hope that someone in Frankfurt or
New York has the imagination to take hold of what you want to do. And once
an idea is out in the market, it is available to everyone."

But Mr Costas sees that view as outdated. He said: "We are not making
decisions by gut feel any more, we are making it on the basis of
mind-boggling access to information. Professionalism in terms of management
across the industry has increased greatly. I think the industry is better
managed than before, but you still have to have people who are
entrepreneurial enough to compete in world markets."

-----

Buccaneering bank founded by Jewish refugee from Nazi Germany
By William Kay
The Independent, 13 November 2002

SG Warburg was founded in 1945 by Siegmund Warburg and his partner, Henry
Grunfeld. Warburg, part of a Hamburg banking family, was a Jewish refugee
from Nazi Germany and trained at Rothschild. He liked to choose recruits by
studying their handwriting.

The bank made its name as a buccaneering operation willing to take risks on
behalf of its clients when in 1961 it masterminded the British takeover of
British Aluminium by Alcan of Canada. It was also a pioneer of the fledgling
but fast-growing Eurobond market in dollars held outside the US.

In the next 30 years Warburg was responsible for kicking over the traces on
many occasions, challenging the authority of the City Takeover Panel, which
was set up to police precisely the sort of rule-bending activities Warburg
specialised in.

When the Thatcher government forced the London Stock Exchange to open itself
up to foreign competition, Warburg was widely tipped to become a global
player in the financial game.

In 1986, at the height of the Big Bang reforms of the London Stock Exchange,
Warburg's chairman, Sir David Scholey, said: "I do not think we have any
sensible alternative to being a global investment dealer. As far as we are
concerned, it is a question of being active in all the key markets, as well
as the related markets like Zurich, Geneva and Hong Kong."

But that proved too difficult to achieve. Although Warburg bought one of the
Stock Exchange's major brokers, Rowe & Pitman, and one of its top
market-making firms, Akroyd & Smithers, and built up a staff of more than
500 in New York, it was unable to challenge the giant American banks - or
their European counterparts.

During 1994 Warburg's reputation was severely damaged by losses on bond
trading and its role in advising Enterprise Oil on an abortive bid for
Lasmo, another oil company.

In December 1994 Warburg was forced to announce that it was in merger talks
with Morgan Stanley, leading to a dramatic loss of confidence.

In February 1995 Lord Cairns, Warburg's chief executive, resigned after a
wave of staff defections because the bank's future was so doubtful.

In May 1995 Warburg succumbed to an £860m takeover by Swiss Bank
Corporation, later itself taken over by Union Bank of Switzerland to form
United Bank of Switzerland, or UBS, under Marcel Ospel. Warburg's fund
management arm, Mercury Asset Management, remained independent until 1998,
when it was bought by Merrill Lynch, the US stockbroker, for £3bn. It is now
known as Merrill Lynch Investment Management.