OSAKA (Kyodo) Second-tier regional banks Kansai Urban Banking Corp. and Biwako Bank said Friday they have reached broad agreement to merge next March 1.

This is the first merger between regional banks based in different prefectures in the Kinki region, which consists of Osaka Prefecture and its neighbors. Kansai Urban Banking is based in Osaka Prefecture and Biwako Bank in Shiga Prefecture.

The two banks hope the merger will help them survive the deteriorating business environment stemming from the recession, analysts said.

The banks said they will negotiate the merger ratio and other details before signing a merger accord in November.

Kansai Urban Banking will be the surviving entity, based in the city of Osaka, and remain listed on the first sections of the Tokyo and Osaka bourses.

The two banks’ deposits totaled ¥3.74 trillion at the end of September, indicating the merged bank would be the third-largest regional bank in the Kinki region in terms of deposits, following Bank of Kyoto and Nanto Bank.

Kansai Urban Banking said it may log a group net loss of ¥25 billion instead of the earlier estimated ¥6 billion profit for the business year ending this month.

To recapitalize itself in the face of the loss, Kansai Urban Banking said it will raise ¥35 billion by issuing preferred securities and common shares to its parent, Sumitomo Mitsui Banking Corp.

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