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Chase and Chemical Combine To Form Nation's Largest Bank

By Jay Mathews
The Washington Post
NEW YORK

Chemical Banking Corp. and the Chase Manhattan Corp. Monday announced plans to merge and create the nation's largest bank.

Financial analysts and investors hailed the agreement to create a giant new bank, which will carry Chase Manhattan's name but be led by Chemical's chairman and chief executive officer, Walter V. Shipley, 59.

The merger agreement, which will create a bank with $297 billion in assets, is a dramatic example of the consolidation underway in the banking industry. Experts said the merger wave will continue because the nation has far too many banks with overlapping branches and services.

Like other recent bank mergers, the Chase-Chemical agreement was encouraged by major investors who think the institutions can operate more efficiently and afford the talent and new technologies that will keep earnings and stock prices high. Rumors of the merger have pushed Chemical and Chase stock up in recent months; shares in both companies jumped about 10 percent Monday.

"The financial services industry is in the midst of the greatest period of consolidation in its history," Shipley said, "and we are seizing upon a truly unparalleled opportunity to create a premier global financial services company."

The deal also underlines the power of U.S. mutual funds, fat with middle-class retirement savings. Michael Price, who runs the New Jersey-based Mutual Series funds, disclosed in April that his company owned 6.1 percent of Chase and openly encouraged the company to look for a rich buyer.

Chase and Chemical bank tellers and office workers are unlikely to celebrate the $10.4 billion merger, however. Shipley said his first assignment is to cut 12,000 jobs from the merged company's total work force of 75,000 to save $1.5 billion a year.

He said he hoped the banking industry's high natural turnover of about 20 percent a year would keep firings to a minimum.