Japanese merger to create
world’s second-largest bankSumitomo Bank has isle stake
Associated PressTOKYO -- Japan's Sumitomo Bank is merging with Sakura Bank in a deal that will create the world's second-largest bank.
The announcement, made at a joint news conference, comes just two months after three other major Japanese banks announced plans for a merger to create the largest banking group in the world.
"We want to enter the ranks of the world's top class banks," said Sakura President Akishige Okada.
The deal was seen as a healthy consolidation in the Japanese financial sector. Government officials cheered as word of talks spread earlier in the day, and Finance Minister Kiichi Miyazawa said it would be good for the Japanese economy.
The combined bank would have total assets of $922 billion, second only to those of the banking company resulting from the planned merger of Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan Ltd. Those three banks have more than $1.2 trillion in assets.
The Sumitomo-Sakura merger, to be completed by March 2002, will not be painless.
The banks will cut their work forces by 6,300 by the time the merger closes, and plan another 3,000 cuts by March 2004. The total cuts of 9,300 jobs represent 29.7 percent of the banks' current work forces of 31,330. They also plan to close 151 of their 800 domestic branches and 32 of their 45 foreign branches. Sumitomo Bank and Sakura Bank are the core financial institutions in the corporate groupings that emerged from the prewar Sumitomo and Mitsui conglomerates.
Sumitomo Bank, which is based in Osaka, has about 15,000 employees. Sakura Bank, Japan's first commercial bank, is based in Tokyo and has about 16,330 workers. It was renamed after a merger between Mitsui Bank and Taiyo Kobe Bank in 1990.
(Sumitomo has had a presence in Hawaii since 1954 when it helped form Central Pacific Bank. Sumitomo now owns 10.4 percent of the stock of Central Pacific's parent, CPB Inc., after a recent sale to Honolulu-based CPB that reduced the Sumitomo holding from 13.2 percent.)
The Sumitomo and Sakura alliance would rival the DKB-Fuji-IBJ combination in both corporate and retail banking.
The merger was also seen as groundbreaking in Japan because it brought together entities from competing conglomerates. But bank officials said new times require new ways of doing business.
"Because of globalization, the logic of business groups no longer works in the financial sector," said Sumitomo President Yoshifumi Nishikawa. "We agreed if we get together, we could create a top global brand."
Analysts saw the merger as the latest evidence of a trend toward alliances, some with foreign entities, that has reshaped Japan's financial system amid government moves to liberalize the sector.
"This will be a very good move for the Japanese banking sector," said Nozomu Kunishige, a banking analyst at Lehman Brothers Japan.
