Bank firms to unite into financial giant

Merger fever hits Tokyo-Mitsubishi

The Bank of Tokyo-Mitsubishi and Mitsubishi Trust & Banking Corp. announced Wednesday that they have reached a basic agreement to come under a single holding company in April 2001, a move that would create the nation’s fourth-largest banking group.

Nippon Trust Bank and Tokyo Trust Bank, both Bank of Tokyo-Mitsubishi subsidiaries, will also enter the alliance. After coming under the holding company in April 2001, the two will be absorbed into Mitsubishi Trust by October of the same year, officials said.

The conglomerate will rank as the nation’s fourth-largest and the world’s fifth-largest banking group, with combined assets of 88 trillion yen. Japan’s third-largest banking group, to be established through a merger of Sumitomo and Sakura banks, will hold 99 trillion yen.

The planned holding company has been tentatively named Mitsubishi Tokyo Financial Group, Inc., the officials said, with Tokyo-Mitsubishi President Satoru Kishi and Mitsubishi Trust President Akio Utsumi serving as joint chief executive officers.

The new trust banking entity, which will retain Mitsubishi Trust’s name, will be headed by Utsumi.

With Wednesday’s announcement, the realignment frenzy that has overcome the nation’s major banks in the past year has more or less reached a conclusion.

Major banks are now consolidated into four major groups. Apart from the one to be created by the Mitsubishi group, they are: the Mizuho Financial Group, to be set up later this year through the integration of Dai-Ichi Kangyo Bank, Fuji Bank and the Industrial Bank of Japan; the Sumitomo-Sakura camp; and a banking group that will band together Sanwa Bank, Tokai Bank and Asahi Bank.

The latest move leaves unanswered the question of whether insurers in the Mitsubishi group will join the holding company.

Four Mitsubishi group financial companies — its two banks, plus Meiji Life Insurance Co. and Tokio Marine & Fire Insurance Co. — announced a broad-range alliance plan last summer.

In a snap news conference Wednesday, Tokyo-Mitsubishi’s Kishi said he “hopes that (the insurers) will say yes (to joining the holding company).”

Meiji Life officials remained noncommittal concerning the prospect of unifying under management with Tokyo-Mitsubishi.

“Because we are a mutual company, we consider participation in the planned holding company, as well as demutualization, a matter for future consideration,” Meiji Life said in a statement.

The Bank of Tokyo-Mitsubishi and Mitsubishi Trust had apparently not been receptive to proposals to integrate their operations since they are believed to be relatively free from bad loan burdens caused when the asset-inflated bubble economy burst in the early 1990s.

But the rush to form alliances by other major banks since last summer affected the two banks’ strategy, the officials said.

“We had various options, to tell you the truth,” Mitsubishi Trust’s Utsumi said.

Analysts reacted favorably to the announcement, although without much excitement. Katsuhito Sasajima, director and senior analyst of the equity research department at Warburg Dillon Read, said the move does not surprise him since both banks have already announced plans to cooperate as part of the four-party tieup.

Still, the alliance will compliment both, by letting Tokyo-Mitsubishi use Mitsubishi Trust’s expertise in such growth areas as pension management and asset securitization, Sasajima said.

Mitsubishi Trust will also benefit from the alliance by gaining access to Tokyo-Mitsubishi’s branches, which outnumber its own outlets, he added.

But a potential problem is that their client bases overlap, as they both cater to Mitsubishi group-related customers, Sasajima said.