Japanese Banks Announce Merger Plan

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Japanese Banks Announce Merger Plan http://search.washingtonpost.com/wp-srv/WAPO/19990820/V000321-082099-idx.html

By Joji Sakurai Associated Press Writer Friday, August 20, 1999; 2:21 a.m. EDT

TOKYO (AP) -- Three Japanese banks announced Friday a broad alliance plan that would create the world's largest banking group, with assets of well over $1 trillion.

Officials of Dai-Ichi Kangyo Bank Ltd., the Industrial Bank of Japan Ltd., and Fuji Bank Ltd. confirmed during a news conference the broad alliance plans to be implemented over the next two years.

Assets at the three banks exceed $1.2 trillion, which would make the new entity the largest banking group in the world. Their assets would surpass the $735.3 billion of Germany's Deutsche Bank and the $652 billion of Japan's largest bank, the Bank of Tokyo-Mitsubishi.

``We aspire to be a powerful player in the global market,'' said IBJ President Masao Nishimura.

In a joint statement, the banks said they expected to reduce the combined number of branches by 150 within five years after forming a joint holding company. The banks said they would consolidate overseas branches ``as soon as possible.''

Over the same time period, the banks pledged to reduce the combined payroll by 6,000 people.

News of the plan sent the banks' stock prices shooting higher in Friday morning trading on the Tokyo Stock Exchange, adding to their gains the previous day on the alliance rumors.

Industrial Bank of Japan shares were traded at $9.70 early Friday, compared with Thursday's close of $8.80.

Dai-Ichi Kangyo Bank shares rose to $9, compared with $8.15; Fuji Bank shares were at $9.30, compared to $8.50.

The shakeup also dominated Japanese media Friday.

There were repeated comparisons to the Citigroup merger last year between Citibank and Travelers Group in the United States, underlining the view that the move was part of a larger international trend.

``This type of basic shakeup is inevitable given the situation of the financial industry,'' said an editorial in Friday's Nihon Keizai Shimbun, Japan's leading business daily.

Reflecting widely held opinion, the Nihon Keizai said that there were simply too many banks in Japan -- with 17, counting just the top banks. One obstacle to the deal, however, may come from the Fair Trade Commission.

The Nihon Keizai reported Friday that the commission will be carefully studying it to see whether it would violate the Anti-Monopoly Law. The commission declined comment on whether it was consulted by the three banks in advance about their collaboration.

If an inquiry is held, the commission will look at the combined shares of units to come under the wing of a planned holding company as well as the impact on overall competition in the financial sector.

Japan's banks have been troubled by masses of loans gone sour after the speculative lending of the late 1980s and early 1990s. Turning around the banking woes has been viewed as integral to help bring along economic recovery in Japan.

Most analysts agree the main problem of Japan's banking sector is that it was overly protected up to now by the government and has never been under much pressure to be competitive. It has a dismal record as far as turning profits and has been slow in cost-cutting.

But there is skepticism that simply creating a bigger bank would not solve such problems.

``The days when it was good enough just to be big are over,'' the Asahi newspaper said in an editorial Friday.

Banks need to cut down on the thousands of excessive employees and keep up with their Western competition in coming up with attractive new financial products, it said.

The expected alliance would allow the banks to put their retail banking, investment banking and brokerage subsidiaries under common management and cut costs by combining overlapping businesses. The banks will also be able to cut back on information technology investment.

) Copyright 1999 The Associated Press

-- Stan Faryna (info@giglobal.com), August 20, 1999


Whooa, fits in with Lyndon Larouche's theory about the massive spurt of mergers this year as the caballists position themselves for the post-collapse era...

-- Andy (2000EOD@prodigy.net), August 20, 1999.

The goal is to get big enough,so the government(s) won't allow you to fail. Chrysler set the stage for this, now everyone is following suit. It is happening worldwide. There is no antitrust anymore.

-- Bill (y2khippo@yahoo.com), August 20, 1999.

Don't know that much should be read into this. There are quite a number of factors at play. The Asian financial crisis, Japan's mile-high debts, and a desire to stay competitive with other large financial institutional mergers in the past decade. If it also gives them an edge in the face of Y2K, that's a bonus, but hardly the major force behind the move. In fact, even if they get the okay to merge (which could take months) it is highly unlikely that they would attempt to integrate any major computer systems at this point until well after Jan 2000.

-- M.C. Hicks (mhicks@greenwich.com), August 20, 1999.

The banks received 'informal' approval before announcing their intended merger. That's just the way it works here. Some bank officials even obtain 'informal' approval from the government prior to going to the bathroom. The important question (for the government) is whether the merger will help beat back the swarm of invading foreign banks (locust).

Japanese banks have received government 'recommendations' that no new financial products should be introduced until March, 2000. The government wants IT people to be focused on y2k. Pointy-headed managers wanting to add new software packages between now and next March are being locked up in karaoke studios and coffee shops throughout Japan until then.

-- PNG (Peter Gauthier) (png@gol.com), August 20, 1999.

Japan will tank big time.

The Japanese government will not be able to control the panic when their citizens make runs on the banks.

Prime time news in the near future...

-- Randolph (dinosaur@williams-net.com), August 21, 1999.

And we have the dreaded monetization...

-- andy (2000EOD@prodigy.net), August 21, 1999.

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