Asahi, Daiwa banks reach broad accord on integration.

TOKYO, Sept. 18 Kyodo

Asahi Bank and Daiwa Bank have reached a broad agreement on integrating operations under the latter's leadership, bank sources said Tuesday.

The two major commercial banks will conclude a basic agreement and announce it later this week, the sources said.

The deal envisages Asahi joining Daiwa in setting up a joint holding company with two Osaka-based regional banks -- Kinki Osaka Bank and Nara Bank -- by March 31, 2002.

The deal would create the fifth largest Japanese banking group with total assets of more than 45 trillion yen, combining the two banks' respective regional bases in the Tokyo metropolitan area and the Kansai region centering on Osaka.

Asahi Bank had 30.2 trillion yen in assets as of March 31 this year, while Daiwa Bank had 15.5 trillion yen. With Kinki Osaka and Nara joining, the group will have assets totaling 50 trillion yen.

Asahi was created through the 1991 merger of two major commercial banks -- Kyowa and Saitama. It is said to lack enough financial resources to pay dividends for fiscal 2001 on preferred shares it issued to the government to receive an injection of public funds into its capital base.

Failure to pay dividends will evoke the government's voting rights, which may place the bank under state control.

By joining the planned holding company, Asahi will be allowed to use capital reserves for dividend payments.

Daiwa announced the holding company plan in August and Asahi subsequently proposed its participation.

Daiwa Bank President Yasuhisa Katsuta will become president of the holding company. Tatsuro Ito, president of Asahi Bank, and Tadashi Tanaka, Asahi chairman, are expected to resign when a plan to integrate operations is worked out.