4TH LD: Hokuriku Bank, Hokkaido Bank to merge in FY 2004.

TOKYO, May 23 Kyodo

(EDS: ADDING INFO ON TOP MANAGEMENT APPOINTMENTS)

Hokuriku Bank  and Hokkaido Bank said Friday they have agreed to integrate their businesses under a joint holding company in fiscal 2004, creating Japan's second-largest regional bank in terms of deposits after the Bank of Yokohama.

Hokuriku Bank and Hokkaido Bank said they will set up a joint preparatory committee to work out specific details of the integration, such as equity swap ratios and the date.

The two leading regional banks had combined deposits of 8,288.5 billion yen as of the end of March.

Hokuriku Bank, based in the city of Toyama, operates mainly in Toyama, Ishikawa and Fukui prefectures in the Hokuriku region. Hokkaido Bank, based in Sapporo, operates mainly on the country's northernmost main island of Hokkaido.

The business integration marks a departure from previous marriages of regional banks, which tend to seek merger partners within their areas of operation.

Hokuriku Bank President Shigeo Takagi, 55, will become president of the joint holding company, which will be based in Toyama, the banks said.

Yoshihiro Sekihachi, the 47-year-old president-appointed of Hokkaido Bank, will assume the post of vice president at the joint firm, they said.

Both banks have been restructuring their businesses through the help of public funds, and the integration is expected to improve their profitability through the closure of overlapping branches and other rationalization measures.

The two banks combined have 322 branches and 5,347 employees on the payroll. They have been cooperating in the operation of their automated teller machines since May last year.

Set up in 1877, Hokuriku Bank had 5,656.3 billion yen in assets as of the end of last September.

Hokkaido Bank, established in 1951, had assets worth 3,359.8 billion yen at the end of September.

The capital adequacy ratio at Hokuriku Bank stood at 7.47% last September, while the ratio for Hokkaido Bank was 6.63%. Both were above the minimum 4% required for domestically operating banks.

News reports on the integration sent Hokkaido Bank stock jumping to a high for the year of 125 yen on the First Section of the Tokyo Stock Exchange on Friday, up 27 yen from the previous day, before closing at 111 yen.

But Hokuriku Bank stock fell 4 yen to close at 144 yen, reflecting market expectations that the stock price will come close to that of Hokkaido Bank stock in the future.