Asahi Bank and Tokai Bank announced Thursday they will integrate their operations under a holding company next October — moving up their original schedule by more than a year.

The decision by the two city banks to bring the consolidation forward signals an acceleration in the reorganization of the nation’s banking sector.

The establishment of the holding company is a followup to the two banks’ comprehensive alliance announced in September 1998. If realized, the integration will create a new banking group with combined assets of some 59 trillion yen, becoming the nation’s third-largest city bank in terms of assets.

The announcement comes less than two months after Industrial Bank of Japan, Dai-Ichi Kangyo Bank and Fuji Bank announced a three-way consolidation in late August to become the world’s largest bank.

In contrast to that merger’s goal of becoming a globally competitive bank, the Tokai-Asahi move is aimed at creating a “multiregional bank” specializing in banking for individual customers and small and medium-size corporate clients.

The two banks will solicit regional banks and nonbank financial institutions to participate in their group, the banks said.

“This is not the end (of our regrouping efforts),” Asahi Bank President Tatsuro Ito told a hastily arranged news conference at a Tokyo hotel. “We hope other financial institutions will join in. This is a beginning.”

The plans are in two stages. The two banks first plan to come under the ownership of a joint holding company to be established next October.

In October 2001, the group will be reorganized into three regional banks — focused on the Kanto, Chubu and Kansai regions — and one investment bank.

The regional banks will not interfere with the existing franchise value of each bank, the officials said. Asahi’s business is mostly in the Tokyo metropolitan area, while Tokai is based in Nagoya and has a strong customer base in the Chubu region.

The planned investment bank will aim at helping retail customers with their fundraising and investment needs. For example, the bank will expand such activities as issuance of privately placed bonds and asset liquidation as well as derivatives.

The group will consolidate the two banks’ existing overseas branches by closing 10 redundant branches and cutting 300 employees — which it hopes will save 3 billion yen.

In the international arena, it will scale back business with non-Japanese clients and specialize in business with subsidiaries of Japanese firms, as well as help small and medium-size businesses in Japan expand overseas, according to the plan.

In all, the banks will save 55 billion yen and cut 4,000 employees, they said. The plans include a reduction of 15 billion yen in costs and 1,400 people by consolidating 70 domestic branches.

The group will improve profitability by significantly cutting back on business with big corporations and scaling down overseas assets and securities holdings, the officials said.

Based on the September 1998 agreement, the banks have already been cooperating in various areas, such as sharing automatic teller machines and cross-selling investment trust products.

Regional banks to be qualified for the group will be those that share the mission of serving retail customers and have made an effort to dispose of their bad loans, Asahi’s Ito said.

He added that such financial institutions can participate by either putting up capital or tying up partially, such as through the sharing of computer systems.

He added that, contrary to speculation, the banks are not currently talking with Daiwa Bank, another city bank, and Yokohama Bank, the largest regional bank, about their possible participation in the group.

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