News > Deals
Japan banks in 3-way deal
March 13, 2000: 6:34 a.m. ET

Sanwa to join Tokai and Asahi in 2001 as banking consolidation wave rolls on
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TOKYO (CNNfn) - Three big Japanese banks Tuesday formally announced plans to join forces next year to form the world's third-largest bank, underlining the rapid pace of change in Japan's hard-pressed financial sector.
    Sanwa Bank, Asahi Bank and Tokai Bank said they would set up a joint holding company in April 2001, and then integrate system operations a year later to slash up to 50 billion yen ($473 million) from their annual costs.
    With roughly $1 trillion in assets, the group would become the world's third-largest financial company behind Mizuho Financial Group, the three-way merger of Daiichi Kangyo, Fuji and the Industrial Bank of Japan and the recently announced $29 billion merger of Germany's Deutsche and Dresdner Banks.
    "The alliance will focus on expanding our profits through the speedy launch of new projects on the back of our solid market base in three main domestic regions, more than on cost-cutting benefits," the three banks said in a statement.
    The holding company will contain all the shares of the three banks, but it was not clear which would be the dominant partner. However, bank officials did say the conversion rate of shares would be based on existing market prices, which would likely give control to Sanwa, with market capitalization nearly double the other two banks.
    Japan has been at the forefront of consolidation in the banking sector as top banks have lost market share to their U.S. and European counterparts. A bad loan crisis, technological lags within Japan's banking system and the global push have been key drivers in the wave of deal making in the last two years.
    The new bank would be slightly bigger than a combined Sumitomo Bank and Sakura, which agreed to merge last October, just a month after regional banks Tokai and Asahi announced their own merger.
    With many of its rivals inking deals, Sanwa has been under pressure to merge. But it reportedly has not been the only bank interested in an alliance with Tokai and Asahi. Reports last year said Daiwa Bank held talks with Tokai and Asahi about a possible deal.
    Analysts said Sanwa would fill a key geographical hole for the group domestically - strength in the Osaka region - and also bring international expertise to the table.
    The move was lauded by Prime Minister Keizo Obuchi, who welcomed the banking consolidation as a boon to customers and banking profits and a boost to Japan's financial stability. However, it failed to impress the stock market.
    "The merger itself is a positive factor but pretty much priced in already, and some are now questioning what exactly the banks aim to do through the merger, besides becoming bigger in size," said Hidenori Karaki of Tokyo Mitsubishi Securities.
    On the Tokyo stock market Tuesday, Sanwa shares closed down 7percent to 1,050 yen. Tokai rose 0.8 percent to 6650 and Asahi rose 0.6 percent to 630.
    Competitors Daiwa fell 7.3 percent to 281 yen while Bank of Tokyo Mitsubishi fell 3.9 to 1, 439 yen. Back to top
    --from staff and wire reports


Deutsche, Dresdner to merge - March 09, 2000

Sumitomo, Sakura to merge - Oct. 14, 1999


Sanwa Bank

Tokai Bank

Asahi Bank

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