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Friday, August 20, 1999 Published at 06:40 GMT 07:40 UK

Business: The Company File

Merger creates world's biggest bank

The headquarters of Fuji Bank in Tokyo

Three leading Japanese banks have announced an alliance forming the world's largest financial group.

Fuji Bank, Dai-Ichi Kangyo and the Industrial Bank of Japan say their operations will be integrated by the spring of 2002.

The BBC's Kana Fushimi: "The merger comes amid the worst recession in Japan since World War II"
Their combined assets amount to about $1,300bn (£812bn) - well ahead of the current leader, Deutsche Bank, which has assets of $735bn (£460bn).

The merger has given rise to fears of widespread redundancies, and it is understood the three plan to cut 6,000 jobs over the next five years, with the closure of 150 of their combined 704 branches.

Reorganisation is expected to concentrate on the retail, corporate, investment banking and brokerage services.

Growing shares

Shares in the three banks surged by about 10% after the announcement.

IBJ closed up ¥100 at ¥1,084; DKB also rose ¥100 yen to ¥1,009; and Fuji Bank ended up ¥90 at ¥1,043.

Economist at Mitsubishi, Norika Hama:"It's good news in the long term but more pain to come before things start to get better"
Banks gained across the board, helping raise the overall Tokyo market. The Nikkei index closed up 218.37 points, or 1.2%, at 18,098.11.

The merger is part of a wave of consolidation in the country's financial sector following the 1990s recession, which left many banks with large bad debts.

There have been several tie-ups in recent months, largely in response to the difficulties the sector has been facing.

Fuji and DKB last year agreed an alliance in trust banking, which mainly involved the management of pension funds.

Earlier this year, Fuji also took over a smaller trust bank, Yasuda Trust and Banking Co.

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