THE TAIYO KOBE BANK, LTD.

1936–1973

Stock index: Tokyo Osaka

The product of a merger between the Bank of Kobe and the Taiyo Bank in 1973, the Taiyo Kobe Bank is unusual in many respects. It has achieved great success as a major commercial, or "city," bank without being directly associated with any of Japan's major trading conglomerates. Instead, its four largest shareholders are unrelated life-insurance companies. Similarly, the bank is equally represented by Japan's four largest securities firms. As one of Japan's most independent companies, the Taiyo Kobe Bank may also be its country's most successful merger.

The Bank of Kobe was established in 1936 as the result of the amalgamation of seven banks in Hyoto Prefecture, the Kobe-Osaka-Kyoto region of western Japan. Osaka, once Japan's financial center, and Kyoto, the pre-Meiji capital of Japan, had by then given way to Tokyo. The Kobe region, however, was still home to many of Japan's large industries, and though the financial community was now focused on Tokyo, many opportunities remained in Kobe. These, however, were not fully exploited until after World War II.

In the years leading up to and during the war, the financial interests of the zaibatsu conglomerates dominated banking and industry in Japan. While many smaller banks were absorbed by the zaibatsu during the war, the Bank of Kobe remained independently managed and free from outside interference.

The merger of the Bank of Kobe and the Taiyo Bank resulted in a nationwide bank with well over 300 branches, the largest network in Japan.

1945–1971

After the war, the Bank of Kobe emerged from a general reorganization of the banking industry relatively intact, and in 1945 added trust operations. Its importance in the region was recognized by regulators in 1949, when it was authorized to become a Class A foreign-exchange bank. It was relatively undistinguished in the banking community during the 1950s, but played an important role in arranging industrial finance, mostly to small- and medium-sized companies in the region.

The Bank of Kobe opened representative offices in London in 1956 and in New York in 1958, and made a name for itself in the early 1960s by seizing two great initiatives. Recognizing its own wealth of staff with planning expertise, the bank opened a consulting division in 1961. The following year it acted as an underwriter and international marketer of bond issues for the city of Kobe. The bank's exposure to these markets led it to open branch offices for these divisions in New York in 1963 and London in 1966, and representative offices in Los Angles 1970 and Sydney in 1971.

However, in accordance with financial regulations designed to keep banking specialized, the Bank of Kobe was obliged to turn over its trust operations to Toyo Trust and Banking in 1960. During the late 1960s a series of bank consolidations and expansions, combined with a more competitive atmosphere, led to a gradual deterioration in the bank's position. It was geographically overconcentrated and limited in its ability to win business in high-growth areas. This, in turn, endangered its long-term viability and, to a lesser extent, that of the region.

The bank, its clients, and the government all wanted to strengthen the bank's position. Because it was an otherwise healthy organization, the most logical solution--and one frequently advocated by the government--was to merge the bank with another similarly troubled organization from another region. A merger would provide geographical diversity and immediately create a larger bank that could benefit from economies of scale.

1940–1974

The Taiyo Bank shared a similar history of independence and catering to smaller industries. It also shared similar problems: it was concentrated in the Tokyo region and was unable to promote itself into a larger role in the financial community there.

Like the Bank of Kobe, Taiyo was founded just before the war, by the merger of four small mutual savings and loans, and incorporated in 1940 as the Dai Nippon Mujin. The bank operated under increasingly difficult circumstances during the war, including heavy regulation. It resumed regular business in 1948, having dropped Dai, meaning "great," from its name. In 1951 it was rechartered as a mutual bank and its name was changed to the Nippon Sogo (or "Japan Mutual") Bank.

Nippon Sogo undertook a slow expansion, but though it accumulated many branches in the Tokyo area, it failed to establish itself as a major city bank. Eventually, in 1968, Nippon Sogo won permission to conduct foreign-exchange transactions. In order to project a new image as an international bank, the company changed its name to the Taiyo Bank.

The merger of the Bank of Kobe and the Taiyo Bank resulted in a nationwide bank with well over 300 branches, the largest network in Japan. Capitalizing on its new status as a top-20 bank, Taiyo Kobe opened a series of offices overseas during 1974. Branches were opened in Seattle and Hamburg, and representative offices were opened in S&atildeo Paulo, Singapore, and Brussels.

1973–1990

The bank suffered only minimally from the oil crisis that began in 1973, since its broad exposure to small- and medium-sized, domestically oriented firms insulated it somewhat from the recessionary period. During the recovery that followed, Taiyo Kobe's growth was driven by the strength of Japan's export-led expansion and high savings rates among its increasingly affluent population. Throughout the 1970s and well into the 1980s, the bank experienced consistently positive growth without any disruptions.

During this period the bank opened a new foreign office about every eight months. Its growth is attributed to the same strategic planning abilities it sells as a business consultant. Under banner names such as "Action IV" and "Innovation V," these management plans have allowed the bank to maintain and increase its competitiveness in the difficult and gradually deregulating Japanese banking industry.

Of Japan's 13 "city banks," Taiyo Kobe still maintains the largest number of branches. In profits per employee or per branch, however, Taiyo Kobe trails its competitors. As it pursues more efficient management policies at home, it is actively working to diversity in the global market. In June, 1987 the bank opened a trust-banking subsidiary in New York that promises to become its most important overseas office.

In August, 1989 Taiyo Kobe and the Mitsui Bank announced that they would merge in April, 1990 to form Mitsui Taiyo Kobe Bank. Taiyo Kobe's strong branch network and domestic savings business are intended to balance Mitsui's stronger corporate and international business. With assets of some ¥40 trillion, it will be the second-largest bank in the world.