TOKYO -- Two Japanese trust banks have tentatively agreed to merge in a sign that a long-awaited shakeout in this country's troubled financial industry may be picking up speed.
Executives from Japan's Chuo Trust & Banking Co. and Mitsui Trust & Banking Co. said at a press conference Tuesday they hope to complete the merger in April 2000. If the deal is completed, it would create a rival to the country's largest trust bank, Mitsubishi Trust & Banking Co.
Unlike commercial banks catering to retail customers, trust banks specialize in managing funds for corporations, pensions and big individual investors.
The deal comes as Japanese banks struggle to dispose of heaps of bad loans left from the collapse of property prices nearly a decade ago. Many banks have been left holding land as collateral for soured loans.
Those loan problems and sweeping deregualtion in Japan's finance industry have prompted many banks to restructure or form alliances, often with foreign firms, in order to survive.
But the union of Mitsui and Chuo would be the first full merger involving major banks since the Bank of Tokyo-Mitsubishi Ltd. was formed in 1996 to create a major commercial bank.
Although the final arrangements for the deal have not been finished, the banks tentatively agreed that one Mitsui Trust share would be exchanged for three-tenths of a Chuo Trust share, which would value the merger at 185 billion yen ($1.63 billion) as of the close of trading Tuesday.
At a press conference, Mitsui president Keiu Nishida and Chuo president Shozo Endo said that Chuo would lead the combined company.
Together the banks would have assets of some 16 trillion yen ($138 billion), second among trust banks only to Mitsubishi Trust and Banking, which has 18 trillion yen ($158 billion) in assets.
The companies had combined revenues of 1.14 trillion yen ($10 billion) in the year ended last March. The new company would have 170 branches nationwide and available funds of 41 trillion yen ($360 billion).
Mitsui is currently Japan's third largest trust bank and Chuo the sixth-biggest.
The banks said they expect current tie-ups with foreign partners -- such as the alliance between State Street Trust & Banking Co. and Mitsui Trust -- will contribute to the merged bank.