Megamerger Would Create Stronger Syndication Player

Not only would the proposed merger of the Bank of Tokyo and Mitsubishi Bank create the world's largest bank - it also would create a stronger competitor in an increasingly international loan syndication market.

Adding loan volume from the two banks and a San Francisco-based Bank of Tokyo subsidiary, Union Bank, the behemoth would be ranked 12th in the American market for 1994.

The combined banks could command a 3% share; the leader is Chemical Banking Corp., at 7%.

Bank of Tokyo was ranked 29th in agent/co-agent loan volume in 1994, Mitsubishi 31st, and Union Bank 40th.

More important, however, the merged giant could be a competitive force in other arenas, particularly the growing Asian market.

The Asian market is highly developed, said John Tierney, director of international investment banking at Bank of Boston Corp. Opportunities have opened up in infrastructure and project finance, he pointed out.

"To the extent that you strengthen an institution, it improves your competitiveness and effectiveness," Mr. Tierney said.

"The area for concern is in emerging markets, such as China, where banks are furiously chasing investment opportunities," said Joseph Mauriello, the partner who heads KPMG Peat Marwick's international banking and finance group.

The primary draw in Asia is the growth potential, which creates opportunities to secure higher margins.

And while an Asian behemoth doesn't change the U.S. loan syndication landscape much, it does affect the development of a marketplace that is increasingly attractive to American investors.

"Major United States relationship customers are moving into Asia," said Mr. Tierney. "Bankers will be moving with them to support their capital needs."

As far as the American loan syndication market is concerned, bigger is not necessarily better.

"There is a deep banking market in the United States," said Mr. Tierney. "I don't think this combination will have any kind of meaningful impact on the American capital markets."

From an agent standpoint, "neither of them are big players," said Steven Miller, a vice president at Loan Pricing Corp. "I don't think they'll be a major force in the market."

In fact, some noted that the proposed combination might create slots for other banks.

"Companies need multiple banks," said Katharine Rossow, a vice president of corporate bond research at Salomon Brothers Inc. "This could even open up opportunities."

Since the merging banks now serve as co-agents on some of the same deals, "the merger might take them out of doing multiple co-agent slots," said Mr. Miller.

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