Warburg Investment Bank Insists UBS Will Not Sell It

speculation that the Swiss banking company UBS AG is interested in selling the investment banking unit.

"Absolutely not -- there's nothing to (those rumors)," said Richard Capone, Warburg's chief executive officer.

Warburg's trading platform and research capabilities are just too crucial in supporting UBS' crown jewel -- the private bank, he said.

"If people took the time to look at how important it is to the group as a whole, they'd realize we can't just carve it out."

His statement echoed those made earlier in the day by UBS chief financial officer Luqman Arnold.

Mr. Arnold rejected reports that Chase Manhattan Corp. and Citigroup Inc. might be negotiating such a deal.

"We continue to have no interest in selling Warburg Dillon Read," Mr. Arnold said through a spokesman.

Chase and Citigroup refused to comment on the matter.

UBS shares on the Zurich stock market closed Monday's trading at $307.48 up $6.80, or 2.3%.

The rival bank Credit Suisse Group ended the day at $192.46, up $1.30.

Talk of a selloff is again haunting the banking unit, because Warburg, though profitable, has neither the heft nor the returns to compete with U.S. bulge-bracket firms.

"It's too successful to be closed, but not successful enough to stand alone," said Christopher Williams, an analyst at Donaldson, Lufkin & Jenrette International in London.

For the first six months of the year, the Warburg division was the most profitable of the five business lines at UBS, producing pre-tax net profit of $1.03 billion.

The company as a whole earned $3.52 billion in the same period.

Yet Warburg has lost some of its clout as an investment bank in Europe, where its market share and number of deals have declined since the 1998 merger of Union Bank of Switzerland and Swiss Bank Corp.

Investment houses such as Morgan Stanley Dean Witter and Goldman Sachs Group Inc. have taken the lead in Europe in highly profitable niches such as mergers and acquisition advisory and equity underwriting.

"Not having a large presence in the United States" also makes it difficult for Warburg to compete internationally, said Mr. Williams of DLJ.

Indeed, Mr. Capone acknowledged in an interview that a strong U.S. position for Warburg is crucial.

"We want to establish a broad enough footprint here so we can maintain a global investment banking position," he said.

To do this, Warburg has been shifting its emphasis from trading for its own account to client relationships.

"We'll be investing in investment bankers rather than risk arbitrage specialists," Mr. Capone said.