Japanese banks announce merger to create 'world top class' financial giant

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The Independent Online

BANKING SHARES in Japan soared yesterday after two of the country's biggest banks announced a merger that will create the world's second-largest financial institution.

BANKING SHARES in Japan soared yesterday after two of the country's biggest banks announced a merger that will create the world's second-largest financial institution.

The presidents of Sumitomo Bank and Sakura Bank last night confirmed reports that they will join forces, the latest in a series of mergers which have transformed the country's embattled financial industry in the past few months.

"We want to enter the ranks of the world's top-class banks," said Akishige Okada, the president of Sakura Bank, at a press conference jointly held with the Sumitomo president, Yoshifumi Nishikawa.

The merger will create a new bank with combined assets of 98.7 trillion yen or about $922bn. This will rank it in second place to what will eventually be the world's biggest banking group, a 1.2 trillion dollar mega-merger announced in August between Daichi Kangyo Bank, Fuji Bank and the Industrial Bank of Japan.

Earlier this month two other banks, Asahi and Tokai, announced a merger of their own which is now expected to draw in new participants such as Daiwa Bank and Bank of Yokohama. Sanwa Bank is now the only one of the big "city" institutions to be without a potential merger partner, and may gravitate towards Bank of Tokyo-Mitsubishi, the offspring of a two-way union four years ago.

"I think the dance is almost over and [there are] not many partners left," said Robert Zielinski, senior vice president of equity research at Lehman Brothers.

Sumitomo and Sakura will cut their combined work force of 31,300 by 6,300 by the time the merger takes place in March 2002. Another 3,000 jobs will be shed over the next two years. They also will close 151 of their 800 domestic branches.

Sumitomo shares closed up 170 yen to 1,735 yen, and Sakura finished up 11.1 per cent at 1,000 yen.

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