Merger creating world's largest bank planned by Mitsubishi, Bank of Tokyo


TOKYO -- Two of Japan's most powerful financial institutions, the Bank of Tokyo and the Mitsubishi Bank, announced yesterday that they will merge, creating the world's largest bank.

With about $819 billion in assets, the new bank would be about a third larger than the Sumitomo Bank, now the biggest with $604 billion, and more than three times the size of Citicorp, the largest in the United States.

If the deal goes through, the new behemoth, tentatively called the Tokyo Mitsubishi Bank, would combine two of the strongest banks in Japan, where the banking industry has been shaken in recent years by the collapse of the country's stock and real estate markets. Some experts see this deal as possibly the forerunner of other large combinations of Japanese banks, many of which are either looking for fresh capital or a strategic alliance to help them compete.

But analysts said the merger would have little impact on banking and trading markets outside Japan. Japanese banks, after all, have been the largest in the world for a decade but they are by no means as influential as such big European and American banks as Credit Suisse, Deutsche Bank and J. P. Morgan & Co.

"These are markets with lots of players," said John D. Leonard, a bank stock analyst with Salomon Bros. in London. "One more or less will not make a difference," he said.

The merger could have some impact, however, on consumers and small businesses in California, where Mitsubishi and the Bank of Tokyo each own medium-sized banks based in San Francisco. The Bank of Tokyo owns about 70 percent of the Union Bank, which has $17 billion in assets and 200 branches. Mitsubishi owns all of the Bank of California, which has about $7 billion in assets and 50 branches.

While these California-based banks could be combined as a result of the merger announced yesterday -- strengthening Union's position as the fourth-largest in the state -- such a deal would face regulatory scrutiny in the United States. For that reason, some analysts say, one of the California banks could wind up being sold.

In Japan, the proposed merger of Mitsubishi and the Bank of Tokyo radically alters the banking landscape. The union, which had been talked about for years, would link the Bank of Tokyo's global presence with Mitsubishi's extensive domestic branch network.

"It's like marrying the two most beautiful people in the world," said Alicia Ogawa, a bank stock analyst at Salomon Brothers Asia Ltd.

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