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Merger Expected to Create One of World’s Largest Banks

August 29, 1989

TOKYO (AP) _ Mitsui Bank and Taiyo Kobe Bank have agreed to merge next April to create the second-largest bank in the world, officials of the two banks announced Tuesday.

Analysts said the merger is the biggest international combination in recent memory.

″In terms of sheer scale there’s nothing like it,″ said Simon Smithson, analyst at Kleinwort Benson Securities. ″It dwarfs anything that exists″ in other countries, he said.

The new bank will be second in total assets only to Dai-Ichi Kangyo Bank, ranked the largest in the world in terms of assets. Currently, Sumitomo Bank is the second-largest bank in Japan.

Mitsui Bank, the country’s seventh-largest bank, and Taiyo Kobe, the eighth largest, will merge into a new bank to be called Taiyo Kobe Mitsui Bank as of April 1, Kenichi Suematsu, president of Mitsui Bank, said at a news conference.

″Facing today’s globalization and liberalization of the financial world ... a bank must have a certain degree of size or quality can’t follow,″ said Suematsu, who will become the president of the new bank.

″We have judged forming a new bank by a merger will lead to providing the best financial and information services to our customers,″ said Yasuo Matsushita, president of Taiyo Kobe Bank, who will become chairman of the new bank.

Suematsu and Matsushita, who said they were close friends for over 20 years, said they hope the merger will strengthen their banks’ domestic and international networks, and expand and rationalize operations to meet increasingly diverse needs.

The Finance Ministry and banking circles generally praised the merger.

″I welcome the decision by both banks to merge, given the liberalization and internationalization of the financial market,″ said Finance Minister Ryutaro Hashimoto. ″I think it is timely to bolster the operation by utilizing increased profits to provide a diversity of sevices to customers in and out of the country.″

Kuniji Miyazaki, president of the Federation of Bankers’ Associations of Japan and also of Japan’s largest bank, Daiichi-Kangyo Bank, hailed what he called a ″courageous decision″ by the banks’ managements, Kyodo News Service reported.

Mitsui Bank, one of the oldest banks in this country, founded in 1876, had available funds of 21.138 trillion yen, or $146.79 billion, at the end of March 1989, 9,760 employees, and 242 branches in Japan and overseas, while Taiyo Kobe had funds of 18.511 trillion yen, or $128.54 billion, 12,931 employees and 374 branches, according to statistics released by both banks.

Mitsui Bank is capitalized at $1.36 billion, while Taiyo Kobe Bank is capitalized at $1.25 billion.

It will be the second major merger for Taiyo Kobe Bank, which was formed by a merger between Taiyo Bank and Kobe Bank in 1973.

Matsushita and Suematsu stressed that the deal is an equal merger, but said the two companies will exchange shares at the rate of eight Mitsui shares for 10 Taiyo Kobe shares. They said the name of the new bank will be reviewed and changed in three years because it is ″too long,″ said Suematsu.

The bank will be known as Mitsui Taiyo Kobe Bank in English, reversing the names in the Japanese version, Taiyo Kobe Mitsui Ginko, company officials said.

Analysts said the merger is apparently aimed at consolidating and streamlining their operations to take advantage of forthcoming banking liberalization measures in Japan.

The merger happened ″because neither bank was really big enough to fufill its ambitions on its own,″ Smithson said.

Analysts said that the merger would join Taiyo Kobe’s extensive domestic network with Mitsui’s international expertise, and create the economies of scale that are the basis of Japanese banks’ international competitiveness.

Japanese banks are generally considered less sophisticated in many aspects of international business than their American or European competitors despute their overwhelming size, but can rely on huge deposits at home to create volume discounts.

The Tokyo Stock Exchange suspended trading of Mitsui and Taiyo Kobe Banks shares all day Tuesday due to the merger, the exchange said.

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