Japanese banks again in red
(CNN) -- Shares in Japan's four megabanks are continuing to fall Monday after two of them reached agreement last week on a tie-up that would create the world's biggest bank.
Mitsubishi Tokyo Financial Group, the second largest Japanese bank by assets behind Mizuho Financial Group, clinched a deal late Thursday to take over fourth-ranked bank UFJ Holdings.
In the process, it edged out rival Sumitomo Mitsui Financial Group, Japan's third largest bank.
In Monday morning trade, UFJ is down 3.5 percent to 468,000 yen and MTFG is about 2.5 percent lower. SMFG and Mizuho are also well in the red.
The broader Tokyo market is down about 1 percent.
UFJ, which has bad loans on its books of 4.5 trillion yen (about $40.5 billion), is expected to sell its consumer credit business Aplus to either Shinsei Bank or overseas giant HSBC, according to the Nihon Keizai business daily.
In a report Monday, the Nikkei said Aplus, which is held 40 percent by UFJ, will be sold for about 100 billion yen (about $900 million).
UFJ on August 6 posted a net first-quarter loss of 91.58 billion yen. It is the weakest of Japan's four megabanks and the only one to post a loss last financial year.
Meanwhile, SMFG has said it will press on with its bid for UFJ, despite the latter's deal with MTFG.
A merger between UFJ and SMFG would create a group with total assets of 180 trillion yen. The UFJ-MTFG combination, which is subject to regulatory approval, would create a bank with assets of about 188 trillion yen ($1.7 trillion), eclipsing current world No. 1 Citigroup's assets of $1.3 trillion.
Under the terms of Thursday's deal, MTFG and UFJ will form a holding company to be known as Mitsubishi UFJ Holdings. They will merge their holding companies, commercial and trust banks, and brokerages from October 1, 2005.
Financial terms were not disclosed, although Mitsubishi Tokyo previously had offered UFJ as much as 700 billion yen ($6.3 billion). Specific stakes are to be determined later, the banks said.
"We are very happy to be able to announce this basic agreement. We believe we are entering a new stage," UFJ Holdings President Ryosuke Tamakoshi told a news conference.
Won appeal
 |  UFJ won its court appeal against an earlier injunction blocking merger talks. |
Tamakoshi will become chairman of the new holding company while Mitsubishi Tokyo President Nobuo Kuroyanagi will become president, they said. Branch closures and job cuts were not discussed.
Last Wednesday, UFJ won an appeal against an injunction blocking takeover talks with MTFG.
The ruling, by the Tokyo High Court, surprised observers and dealt a blow to SMFG's chances.
Earlier, SMFG president Yoshifumi Nishikawa told Japanese television he had offered UFJ more than 500 billion yen ($4.52 billion) in a formal merger proposal.
In May, UFJ had agreed to sell its trust bank to Sumitomo Mitsui, but cancelled that agreement in mid-July so it could pursue merger talks with MTFG.
A Tokyo District Court in late July upheld a challenge from Sumitomo Mitsui against that plan, and ordered UFJ and MTFG to put their talks on hold.
But the Tokyo High Court on Wednesday afternoon last week repealed that temporary injunction, allowing trust bank merger talks between the two banking groups.
That paved the way for Thursday's announcement.
