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Banks mull immense deal
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August 19, 1999: 7:22 a.m. ET
Japanese groups discuss alliance to create world's biggest bank
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LONDON (CNNfn) - Industrial Bank of Japan, Fuji Bank and Dai-Ichi Kangyo Bank are discussing a merger to create the world's biggest bank with about 140 trillion yen ($1.26 trillion) in assets, according to press reports.
A spokesman for IBJ told CNN the bank was in talks with other banking groups about mergers, but refused to confirm the negotiations involved Fuji and Dai Ichi.
"It is true that we are mulling various tie-up possibilities, although we have not made any decision yet," he said.
Fuji Bank confirmed to Reuters the three banks are in talks.
The three banks' shares soared on reports in the Japanese press, although they were quickly suspended by the Tokyo Stock Exchange. Before the suspension, IBJ stock rocketed by its daily trading limit of 100 yen to 984 yen, a 12 percent increase. DKB rose 11 percent to 909 yen and Fuji Bank jumped almost 12 percent to 953 yen.
The possible deal comes at a propitious time for the Japanese banking sector, which analysts say needs to slim down.
"Consolidation is desirable, Japan is overbanked and there is too much competition," Matsuo Suzuki, bank analyst at rating agency Moody's in Tokyo told CNNfn.com.
He predicted consolidation would improve the dire profitability of many Japanese banks, where stiff competition has prevented them from pricing loans to adequately reflect the risks.
Japan's leading daily, Nihon Keizai Shimbun, suggested a deal could be announced before the end of the month, with the three companies set to merge their operations by autumn of 2000. All three banks have exactly the same credit rating from Moody's of BAA2 on their senior debt.
The biggest bank in the world in terms of assets is Germany's Deutsche Bank (FDBK).
-- from staff and wire reports
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