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Japan Bank Drops Merger Plans

June 15, 2000

TOKYO (AP) _ Asahi Bank Ltd. said Thursday it will pull out of a planned three-way merger that would have formed Japan’s second-largest banking group.

The announcement came three months after Asahi, Sanwa Bank Ltd. and Tokai Bank Ltd. announced their intention to join forces, saying they would set up a joint holding company in April 2001 and reorganize their retail, international and other operations.

Asahi Bank, however, has officially decided to ``put off″ the deal, the bank said in a statement.

``Because of a difference in opinion regarding the method of integration, we came to the conclusion that it would be difficult to unify our operations,″ the statement said.

Asahi added that it preferred to strengthen its main regional retailing business.

Sanwa was a latecomer to the merger talks. Asahi and Tokai had announced plans for an alliance in October 1998. The three-way deal with Osaka-based Sanwa, the nation’s fourth-largest lender, was announced on March 13.

Sanwa’s plans to make the new bank into a universal lender probably clashed with Asahi’s strategy of focusing on retail banking in the greater Tokyo area, analysts said.

Asahi likely wants to become a ``super regional bank,″ said Setsuko Akiba, a banking analyst at Deutsche Securities in Tokyo. She said Asahi may look for smaller tie-up partners in the Tokyo metropolitan area.

A three-way merger would have formed the world’s third-largest bank with combined assets of around $1 trillion.

Analysts said Asahi’s dropping out may not necessarily be detrimental to Sanwa and Tokai.

The assumption that fewer assets mean the new bank will be less competitive is ``outdated,″ said Yoshinobu Yamada, a banking analyst at Merrill Lynch in Tokyo.

``Asahi’s decision to go its own way will speed up the integration between the other two banks and clarify their strategy, which until now has wavered between a universal and regional approach,″ he said.

National broadcaster NHK reported earlier Thursday that Japan’s finance authorities, who support realignments among Japanese banks, would ask Asahi to make efforts to remain in the planned merger.

The March announcement was the latest in a string of consolidations among Japanese banks struggling to regain a competitive edge and settle colossal bad loans from a speculative lending boom in the late 1980s and early 1990s.

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On the Net:

Sanwa Bank Ltd: http://www.sanwabank.co.jp/english/index.html

Tokai Bank Ltd: http://www.csweb.co.jp/TBK/tkbehom2.htm

Asashi Bank Ltd.: http://www.asahibank.co.jp/ENGLISH/index.html

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