Through a three-way merger, Japan would give the world its largest bank, but it could take years for that new bank to exert the influence and power its compatriots once wielded in U.S. markets.

Dai-Ichi Kangyo Bank, Industrial Bank of Japan, and Fuji Bank confirmed Friday that they would merge to form a $1.3 trillion-asset behemoth, eclipsing the current world banking giant, Deutsche Bank AG. In doing so, the new bank would streamline its workforce by 15% and reorganize its massive debts and problem loans.

"It's a good sign that Japan is continuing with its much-needed banking sector restructuring," said Andrew Szamosszegi, an analyst with the Economic Strategy Institute in Washington. "But all of those banks are retrenching here. Don't expect any of that to change. There won't even be rapid changes in Japan."

In outlining their consolidation plan, Dai-Ichi Kangyo, Fuji, and Industrial Bank of Japan don't appear to be on a fast track. The banks will continue to operate independently even after a holding company is formed, and that step isn't expected until the fall of 2000. The banks don't expect to be ffully integrated until 2002, and though the banks are expected to combine some services, they haven't spelled out details.

Many observers also pointed to the fact that Dai-Ichi Kangyo is the product of a merger in the 1970s and is an extreme example of how painful financial services mergers can be in Japan. The bank was so divided that until the mid-1990s it maintained separate personnel departments for its predecessor companies.

"DKB remained separate for a long time," Mr. Szamosszegi said. ''There's more pressure on this bank to merge, but I can't expect it to happen inside of seven to eight years."

Scott Pardee, former chairman of Yamaichi Securities' U.S. arm and now executive director of the Massachusetts Institute of Technology's financial research center, said the biggest factor in whether the new bank, or any Japanese bank, could make a substantial push in the United States would be the Japanese economy.

"Most Japanese institutions are looking at their homeland now, so they can have a solid base on which to make profits," Mr. Pardee said. "They have been pulling back overseas. But it's only natural that if the Japanese economy picks up steam, Japanese companies will be more active abroad, which will bring Japanese banks back into the picture."

Japanese banks wielded their greatest U.S. influence in the early 1980s and early 1990s. They were major players in the corporate loan market, gobbled up majority stakes in securities firms, and swallowed real estate. Remnants of their last U.S. push remain today: Fuji Bank owns a majority stake in the specialty finance firm Heller Financial Inc. Bank of Japan owns IBJ Whitehall Financial Group, a New York-based middle-market corporate lender. Dai-Ichi owns a majority stake in CIT Group Inc.

Robert Woods, who headed Citibank's market-corporate loan team at the height of Japanese influence, recalled that the banks were bolstered by huge balance sheets built by extensive holdings in Japan's booming industrial sector.

"They were 20% to 25% of who you sold your loans to in the latter half of the 80s," Mr. Woods recalled. "If you were syndicating a real estate deal, they were 50%. They were the largest single group in the market, and they changed the competitive landscape."

As recently as 1995, Japanese banks participated in 8% of all U.S. syndicated loans. This year all Japanese banks have participated in only $11.1 billion of $571 billion syndicated loans in the first six months of 1999 -- less than 2%.

The Japanese also have scaled back their rapid investment in U.S. securities dealing. Though Fuji and Industrial Bank of Japan won primary dealership status in the early 1990s, neither of those banks' U.S. efforts have developed substantially. Analysts said they believe IBJ will lead investment banking; Fuji and Dai-Ichi probably would be retail-based banks.

"First they have to sort out what kind of joint operations they will have," Mr. Pardee said. "Some parts of the entities will be useful, like the primary dealers. Trading operations clearly will have to be brought together, and they will have to develop a common strategy. That will be the most difficult part developing a common strategy for the U.S."

Still, many analysts said the new bank has the potential to be a dominant player on the world scene someday.

"You have three strong well-regarded banks coming together," said Paul Pilecki, an international financial services attorney with Shaw Pitman in Washington. "It has great potential against its competitors. The whole could be greater than the sum of these parts."

James R. Kraus, Laura Mandaro, and Dan Weil contributed to this report.

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