The merger pact took the market by surprise, given that the pair reportedly initiated talks just in the first week of January. For two major financial institutions to come to such a momentous decision in just a few weeks' time is unprecedented in Japan. The pending allies also will link their automated teller machine systems and jointly operate multifunctional branch offices. Osaka-based Daiwa Bank would transfer its trust subsidiaries to the other two institutions as part of a business revamping initiated by all three banks. For its part, Daiwa Bank disclosed in October that it wanted to shed extraneous operations to focus on retail banking in the Kansai region.
Observers laud the momentum developing behind consolidation in Japan's banking business.
Many experts, especially foreigners, long have argued that the industry includes too many inefficient players. Other pundits warn, however, that consolidation does not necessarily mean greater efficiency. Alliances should be judged carefully by investors and regulators alike, they caution. Even companies that make a good match on paper face many hurdles to a successful union. Differing business practices, divided loyalties among employees and customers, and other intangibles can leave even well-conceived and positively received partnerships in shambles.