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Sean Kennedy

DEPENDING on regulators approving the marriage, Chase Manhattan Bank and Chemical Bank of the United States should move to merge after March 31 next year, according to a senior Chase executive.

  Vice-chairman Michel Kruse said the banks were doing as much as they were legally permitted to, in terms of working out implementation of the merger.

  'Any merger of big companies is a heavy duty task in terms of actual execution - integration of business systems, technical support, large branch networks, global trading and capital markets,' Mr Kruse said.

  The new entity, to be called Chase Manhattan, will have a tier-one capital adequacy ratio of eight per cent and total capital adequacy of 12.1 per cent, comfortably ahead of the Bank for International Settlements' minimum.

  It will also have US$297 billion in assets, $20 billion in shareholders' equity and $149 billion in loans.

  The merger dwarfs the previous biggest acquisition in US banking, First Union's agreement in June to buy First Fidelity Bancorp for $5.4 billion.

  The combined bank will be bigger than Citicorp, the biggest bank in the US with assets of about $250 billion at the end of last year.

  After the merger, 46 per cent of the combined group's revenue will come from consumer banking and 45 per cent from institutional banking.

  The combined bank will be the biggest bank in loan syndications, trading revenue, mortgage servicing, consumer deposits and branch banking in New York.

  It will also be the fourth-largest credit card bank in the US.

  Until the approvals were granted, Mr Kruse said the two institutions had to act like separate entities in planning the merger.

  Both banks estimated they would cut costs and jobs by 15 per cent but they did not predict a sweeping series of lay-offs worldwide.

  'We expect to accomplish a large part of that through attrition, because of the turnover rate of low level staff jobs in branches and because parts of the processing business are routinely quite high - about 15 per cent to 20 per cent [annually],' Mr Kruse said.

  He said employees in Hong Kong appeared to have reacted favourably to news that the two banks were joining forces.

  'There has been a very positive attitude towards the merger itself and to its merits,' Mr Kruse said.

   'I have not actually heard negative comments from employees or clients.'   He attributed the employees' reaction to a programme, initiated in January last year, in which the bank granted every employee options for 400 Chase shares.

  The options had an exercise price of $35, conditional on the underlying shares reaching two levels: $52 and $60.

   'That means that all employees have been following our stock price with keen interest,' Mr Kruse said.

  At $60 a share, an employee who exercised the options was looking at a $10,000 gain, he said.

  The merger did not signify an attempt to be all things to all people worldwide - Mr Kruse said the bank planned to stick to what it knew.

  'The important thing when you run any large business is to make a decision on where resources are going to be used, so you can be a top global company,' he said.

  'Our decision was that, in the retail sector, we did not have a sufficiently strong presence outside the United States.' 



Chase merger needs time