Japanese banks plan merger dates

The banks have set a timetable for the potential merger

UFJ, Japan's fourth biggest bank, hopes to sign a deal with rival Mitsubishi Tokyo Financial Group (MTFG) to create the world's biggest bank by next autumn.

The pair hope to complete a takeover between April to September 2005, and will also discuss a potential capital injection by MTFG into troubled UFJ.

The two aim to sign a basic agreement on the takeover and capital injection by the end of this month.

MTFG, Japan's second largest bank, is one of the country's healthiest.

However UFJ, with a market value of 2.49 trillion yen ($22.7bn; £12.2bn), has lagged behind other top banks in cutting its bad loans, put at 3.95 trillion yen.

BANK BREAKDOWNS UFJ: Net income - 402bn yen loss UFJ: Assets - 82 trillion yen UFJ: Branches - 520 domestic, 26 overseas MTFG: Net income - 560bn yen profit MTFG: Assets - 106 trillion yen. MTFG: Branches - 315 domestic, 81 overseas source: UFJ, MTFG March 2004

The move would act as a rescue plan for UFJ, say analysts, after three years of heavy losses and the resignation of its top officials in May.

The combined group would have assets of 188.7 trillion yen ($1.72 trillion; £0.93trillion), replacing Citigroup with $1.32 trillion at the top of the world rankings.

MTFG is in second place with Sumitomo Mitsui Financial Group Inc in the Japanese rankings, behind leader Mizuho Financial Group.

Banking recovery

Japanese banks have been under increased pressure to sell-off non-core assets in order to raise their cash pile and better fend off the threat of bad debts.

The tide may have turned following a recent set of solid bank results, which seem to be evidence that years of groaning under the weight of trillions of yen in bad debts accumulated during the free-spending 1980s may be coming to an end.

The debts were secured against shares and property, both of which crashed in value during the 1990s.

The bank debts have been one of the main obstacles to Japan's recovery - the world's second largest economy.