A merger would be a big first step toward reducing overcapacity in the Swiss banking industry. American banks are going through a wave of mergers and acquisitions intended to reduce capacity and improve efficiency, and Japanese banks are also experiencing a painful consolidation. Like all of Switzerland's banking companies, CS Holding and UBS have struggled to increase a string of mediocre profits, and the merger, which would no doubt result in substantial layoffs, is likely to contribute to improved earnings. For the year that ended in December, CS Holding reported a 7.5 percent increase in earnings, to 1.54 Swiss francs, while UBS posted a disappointing 3.8 percent rise, to 1.7 billion francs. Union Bank of Switzerland, should it opt for a merger with CS Holding, might be able to forestall a showdown with Mr. Ebner on April 16, when its annual meeting is scheduled. Mr.