Sanwa Bank and Tokai Bank will form UFJ Bank by Jan. 15, completing their merger two and a half months earlier than planned, due to better-than-expected progress toward computer systems integration, Sanwa and Tokai presidents said Wednesday.

Moving up the timetable of the merger, originally planned for April 1, will give the two banks under UFJ Holdings Inc. 8 billion yen to cover restructuring costs and bad loan disposal for the current fiscal year, which ends March 31.

At the same time, the system consolidation will accelerate UFJ's planned reduction of branches, resulting in 81.5 billion yen in projected cost cuts through March 2006.

"Moving up the time schedule increases our capacity to deal with more bad loan disposal, but we do not need to count on the extra funds," said Sanwa President Kaneo Muromachi. "We can proceed with bad loan disposal within our earnings."

UFJ Holdings, set up April 1 to integrate the operations of Sanwa, Tokai and Toyo Trust & Banking Co., is one of the nation's four major banking groups. The three UFJ group banks announced March 15 they would post losses for fiscal 2000 after writing off 1.13 trillion yen in bad loans, roughly double the planned amount.

Sanwa and Tokai plan to lay off an additional 1,200 employees, raising the total to 8,100 employees to be cut by March 2005. It will also close 148 branches, up from the originally scheduled 108 branches, by March 2004 and cut 16 additional offices overseas, up from the originally planned 13.

The two banks will further sell off and cancel lease contracts for head offices in Tokyo, Nagoya and Osaka to the tune of 8 billion yen. They will also reduce the number of directors and auditors on staff by 20 percent and cut directors' pay by 30 percent. This will reduce costs by 1.5 billion yen, they said.

"I believe there is little more that can be done to cost cuts," said Tokai President Hideo Ogasawara. "We may be able to reduce office space further, but that's about it."

Talks have not yet begun to decide who will remain as CEO of the new bank.

Toyo Trust, to be renamed UFJ Trust & Banking Co., will focus on trust business. Further decisions about UFJ's organization will be finalized by September or October, Muromachi said.

To make final adjustments to the new system, Sanwa and Tokai automated teller machines will be suspended for three days starting Jan. 12.

UFJ Holdings has relatively fewer assets than other Japanese financial groups, which are backed by giant corporate groups.

UFJ decided to accelerate its consolidation efforts by renaming the trust bank and transferring its banking business to the merged bank to get a jump on its rivals.