NEW YORK (CNN/Money) - J.P. Morgan Chase & Co. has agreed to buy Bank One Corp. for about $58 billion in a merger that will combine two of the biggest banks in the United States, the companies announced Wednesday.

The merged entity would rank as the nation's No. 2 bank behind Citigroup, with assets of $1.1 trillion and 2,300 branches in seventeen states.

On its own, J.P. Morgan would have fallen to No. 3 after Bank of America Corp.'s $47 billion deal to buy FleetBoston Financial Corp. is completed. Bank One currently ranks No. 6.

The deal for Chicago-based Bank One will extend J.P. Morgan's reach through the Midwest and the Southwest, and lessen its dependence on investment banking and trading, analysts said.

J.P. Morgan also gets a strong retail and credit card presence with Bank One, the world's largest Visa card issuer.

Analysts were enthusiastic. "There is a real logic to [the Morgan-Bank One merger]," Bert Ely, a banking consultant at Ely & Co. in Alexandria, Va., told Reuters. "The only thing I would wonder about is might a competing bid come in."

Bank One's Jamie Dimon is expected to take charge of the merged entity after two years.

"Lovely deal," Michael Stead told Reuters. Stead, who runs the $550 million Wells Fargo SIFE Specialized Financial Services fund, owns shares of both banks. "They would command a wider geography, and they could cross-sell products more easily. A combination would be better than the sum of the parts."

J.P. Morgan Chase, whose roots date to 1799, was formed three years ago from the merger of Chase Manhattan and J.P. Morgan.

The merger of J.P. Morgan and Bank One, expected to close in mid-2004, would be the third largest in U.S. financial services. In 1998, Travelers Group bought Citicorp for $70.2 billion to create Citigroup, and NationsBank bought BankAmerica for $59.2 billion to create Bank of America Corp.

Under the deal announced Wednesday, New York-based Morgan said it would exchange 1.32 shares of its stock for each Bank One share.

William Harrison, chairman and CEO of J.P. Morgan Chase, and James Dimon, chairman and CEO of Bank One, talk about their proposed $58 billion merger. Play video (Real or Windows Media)

At Wednesday's closing prices, that would equal $51.77 a share, or about $58 billion based on Bank One's roughly 1.12 billion shares outstanding.

J.P. Morgan said Chairman and CEO William Harrison, 60, will take those roles at the merged company. Bank One chief Jamie Dimon, 47, will become CEO of the company in 2006, the companies said.

That represents a coup for Dimon, who moved to the helm of Bank One in the spring of 2000 after leaving Citigroup, where he had been considered a leading contender for the top job.

Cost cutting is part of the logic of the deal. Harrison said "we will have about 10,000 job eliminations," about 7 percent of the banks' U.S. work force. He said the banks haven't decided where cuts will be, but "the number will hopefully not be near 10,000 because we'll have attrition."

YOUR E-MAIL ALERTS Follow the news that matters to you. Create your own alert to be notified on topics you're interested in. Or, visit Popular Alerts for suggestions. Manage alerts | What is this?

J.P. Morgan said it expects $3 billion of pretax merger costs, and $2.2 billion of pretax savings over three years. It said it expects the merger to boost profit in 2005.

Bank One (ONE: Research, Estimates) stock jumped 10 percent while J.P. Morgan (JPM: Research, Estimates) shares slipped 4 percent in after-hours trading on Instinet.

J.P. Morgan had assets of about $793 billion as of Sept. 30 while Bank One's assets totaled $290 billion.  

-- from staff and wire reports