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Warburg shows a slimmer profile

After months of delays, the New York Federal Reserve Bank is close to approving Swiss Bank Corp's merger with SG Warburg in the US. But there will be a lot less left to merge than originally expected. Uncertainty about the future of the US piece of Warburg, combined with a post-integration reorganization at SBC Warburg, has led to an exodus of investment bankers and analysts in New York.

The upshot is that Warburg now has a much smaller US equities presence. Among those who have left are two high-profile members of the management team, investment bankers Mike McCarty and Philip Keevil. The two had been recruited in 1991 to build up the US investment banking effort and co-headed the firm for a time.

Swiss Bank confirms that Warburg New York has lost almost two-thirds of its investment bankers, down from 64 to 25, and the number of equity analysts has also declined dramatically, from 32 to nine. Total headcount is down from nearly 500 to about 280. That may suit the Fed, which, say former Warburg executives, has been uneasy about the extent of Swiss Bank's securities operations in the US ever since it bought aggressive US derivatives dealer O'Connor & Partners.

Adding in a relatively large Warburg equities business - at one time it ranked ninth in trading volume on the New York Stock Exchange - would be likely further to antagonize the regulator. Before Swiss Bank's purchase of Warburg, says a former US Warburg executive, at least half of Warburg's US and Canadian annual revenues of about $300 million came from the US equities business.

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