The sale of family-run La Roche, which was founded in 1787 and is among the oldest banks in Switzerland, comes as the country's banks face a host of problems from a long-running U.S. investigation into tax evasion, a stronger Swiss franc and far higher costs of doing business.

La Roche is the latest in a string of smaller Swiss players to sell out. Experts and bankers predict the Swiss banking sector will shrink by about a third in the coming years under the burden of higher costs and dwindling revenue.

"The cost of doing business will continue to rise," part-owner and Chief Executive Christoph Gloor told Reuters on Friday.

All business activities and staff at La Roche will be moved to Notenstein within the next six months, the two banks said, except for clients with any connection to the United States, where prosecutors are investigating the role of Swiss banks in helping wealthy Americans evade taxes.

"This transaction creates value for our clients, who can now benefit from the comprehensive range of services offered by Notenstein and its asset management units," La Roche Chairman Johann Jakob La Roche said in a statement.

La Roche is among the Swiss banks to have come forward to work with U.S. officials in a government-brokered scheme to pay penalties for their activities with U.S. clients, in return for not being criminally prosecuted.

"We're waiting for a non-prosecution agreement and we hope that we can resolve this issue in the first half of this year," said Gloor. "We don't have any indication, but we hope so."

Gloor's comments echo those made by the chief executive of Zurich-based Julius Baer, which is one of a handful of Swiss banks under criminal investigation by U.S. prosecutors.

Banks such as La Roche and Notenstein, dwarfed by Swiss giants UBS and Credit Suisse, are seen by experts as the most exposed to the central bank's decision last month to allow the franc to float freely, and to impose charges on some franc deposits to discourage haven flows.

(Reporting by Kirsti Knolle, Rupert Pretterklieber and Oliver Hirt; writing by Katharina Bart; editing by Elaine Hardcastle and David Clarke)

Stocks treated in this article : Credit Suisse Group AG, Julius Baer Gruppe AG