|
Sumitomo, Sakura to merge
|
 |
October 14, 1999: 3:28 p.m. ET
Japanese banks would form world's No. 2 bank, with assets of $900B
|
LONDON (CNNfn) - Japan's Sumitomo Bank and Sakura Bank announced plans Thursday to merge, forming the world's second-biggest bank.
The announcement comes just two months after three other major Japanese banks announced merger plans to create the world's biggest bank.
Finance Minister Kiichi Miyazawa said the Sumitomo-Sakura merger would be good for the Japanese economy, but he appeared surprised by the news, which comes just a week after two other major Japanese banks -- Asahi and Tokai -- announced plans to merge.
"I welcome the merger, and at the same time I think that it was unavoidable," Miyazawa said. But, he added, "I did not think this (consolidation) would happen at such a fast pace."
Creating a bank with $900B in assets
The deal between Sumitomo and Sakura, currently the country's third- and fifth-largest banks in terms of assets, according to Reuters, will create a bank with assets of more than $900 billion.
Before the actual merger, which is expected to take place by April 2002, the banks said they would take an unspecified stake in each other, forge alliances in all business areas, and integrate computer systems that control deposits and lending. Other details of the deal will be decided later, they said.
They have decided, however, that creation of the new bank will lead to job cuts. Sumitomo and Sakura said they would reduce their combined work force by 9,300, or nearly 30 percent, by March 2004.
Merger to rescue Sakura
The merger is seen as a rescue of Sakura, which had been pressed to find a strong partner because of its fragile financial health and relatively high level of problem loans, estimated at 1.8 trillion yen at the end of March.
Sumitomo, the stronger partner with a strategic tie-up with the nation's second-biggest brokerage, Daiwa Securities Group, is also wrestling with two trillion yen in problem loans.
Sumitomo lost $3.1 billion in the year ended March 31 while Sakura lost $450 million in the same period.
Their merger is the latest in a rapidly consolidating Japanese banking industry. Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan said in August they will merge, creating the world's biggest bank , with assets of more than $1.3 trillion.
Asahi Bank and Tokai Bank, two of the largest regional banks, agreed last month to combine. They have total assets of $550 million.
The Japanese banking sector came near collapse over the last three years as domestic asset prices tumbled and banks were exposed to a huge increase in bad loans. The government was forced to bail out several institutions while others have been closed or brought back under state control.
The crisis has seen Japanese banks withdraw as the biggest global corporate lenders, allowing banks in Germany and the United States, such as Deutsche Bank and Citigroup, to overtake their Japanese rivals.
The merger frenzy is seen as an attempt to restore the Japanese banks' leadership role once their finances have been repaired.
News of the latest deal Thursday helped boost Tokyo stocks, and Sumitomo Bank and Sakura Bank shares each jumped about 11 percent. 
-- from staff and wire reports
|
|
|
|
|
 |
|
