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BTM in Japanese bank tie
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April 19, 2000: 7:54 a.m. ET
Bank of Tokyo-Mitsubishi creates global No.5 with Mitsubishi Trust
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LONDON (CNNfn) - Bank of Tokyo-Mitsubishi, Japan's largest, announced plans to merge with Mitsubishi Trust & Banking Corp. to create the world's fifth-largest bank. The deal would create a company with assets of ¥87 trillion ($831.7 billion).
The tie would mark the latest step in the rapid consolidation of Japan's troubled banking sector, a process that has been driven by a huge overhang of bad debts and overvalued assets that banks bought during the late 1980s and the deregulation of Japan's brokerage sector in 1998.
The announcement received a mixed reception from analysts, who questioned the likely synergies from the merger. Recent bank deals such as the abortive Deutsche-Dresdner tie and HSBC's link with Merrill Lynch have focused on creating global banking franchises. A series of deals in Japan, though, are intended to restructure domestic franchises and protect the huge savings market from incursion by overseas institutions.
BTM (MBK: Research, Estimates) shares ended down 5.3 percent, valuing the bank at around $69 billion. The shares, listed in Tokyo and with American depositary receipts listed in New York, had already climbed strongly in recent sessions amid speculation about a deal. Mitsubishi Trust rose 8.6 percent in Tokyo trade.
 As with Japan's three other huge bank mergers announced over the past 10 months, BTM and MTB will continue to operate as separate entities. They plan to set up a joint holding company, to be known as Mitsubishi Tokyo Financial, in April 2001.
MTB would be merged with BTM's small trust operations, Tokyo Trust Bank and Nippon Trust Bank. The holding company's shares will be listed in Japan and on the New York Stock Exchange. It would have 24,000 employees and more than 400 branches.
BTM will boost asset arm
The new bank will rank as Japan's fourth largest following the latest round of consolidation, but is the first major deal to combine a commercial bank with a trust bank. MTB is already No. 1 among Japanese trust banks - institutions that focus on domestic consumer banking and asset management.
BTM, formed by the merger of Bank of Tokyo and Mitsubishi Bank in 1996, was formerly Japan's largest financial institution, although it will be overtaken by new banks being formed in a series of mergers recently unveiled. BTM's assets stand at ¥68 trillion.
Both banks are members of Japan's biggest industrial grouping; the keiretsu controlled by Mitsubishi Group, and there was disappointment that BTM has not sought to tie with a rival keiretsu to speed industry consolidation, a path taken by the other recent mergers..
The planned three-way tie of Industrial Bank of Japan, Fuji Bank and Dai-Ichi Kangyo Bank announced last August will have assets of ¥135 trillion when it is completed later this year, making it the world's largest bank.
Sakura Bank and Sumitomo Bank announced plans to combine in October 1999 to capture the No. 3 spot in Japan, ahead of BTM, with ¥99 trillion in assets.
Sanwa Bank, Tokai Bank and Asahi Bank announced plans in March to join forces next year, creating the world's second-largest bank with assets of ¥103.7 trillion yen.
BTM President Satoru Kishi and Mitsubishi Trust President Akio Utsumi are to be appointed co-chief executive officers of the new holding company.
Rating agencies Standard & Poor's and Moody's Investors Service both placed the two banks' creditworthiness under review for possible upgrade. Moody's and S&P stressed the benefits to MTB from using its new partner to distribute its savings products while BTM will enhance its own small existing asset management business.
BTM reported a net loss of ¥86.9 billion in the year to Mar. 31 last year on income of ¥3.95 trillion. MTB, which has won praise for cleaning up its bad debt backlog, made a net loss of ¥162.8 billion on income of ¥990.7 billion. 
-- from staff and wire reports
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