Japanese Banks Plan to Merge State Holdings : Finance: Combination of Union Bank and Bank of California would create the state’s fourth-largest entity.

Bank of Tokyo Ltd. and Mitsubishi Bank Ltd. said Friday that they plan to merge their California banking units--creating the state’s fourth-largest commercial bank--as part of their overall merger proposal announced in March.

The giant Japanese banks said they plan to combine Union Bank, which is 72% owned by Bank of Tokyo, with Bank of California, which is wholly owned by Mitsubishi Bank.

A Union Bank spokesman said layoffs are likely as the banks consolidate certain overlapping operations, but added that the exact number is not yet known. Union Bank employs 7,066; Bank of California has 2,845 workers.

“We would be remiss if we said it just won’t happen,” said Stephen Johnson, a senior vice president at Union Bank. “We haven’t developed any specific plans, but it’s likely that there will be some redundancies, and hopefully some opportunities [for employees] as well.”

The new San Francisco-based bank would be called Union Bank of California and would have assets of $25 billion--behind BankAmerica Corp., First Interstate Bancorp and Wells Fargo & Co.

Union Bank is about twice the size of Bank of California in terms of assets. Both focus on business customers.

Bank of Tokyo and Mitsubishi said they expect to complete the merger of their California operations next April, at the same time they themselves merge. Their marriage would create the world’s largest bank--a financial colossus with assets of more than $814 billion.

In California alone, the pending merger promises to ratchet up the rivalry among West-based banks competing for the burgeoning Pacific Rim business--both Asian companies setting up operations in the United States and U.S. companies seeking growth overseas.

Indeed, a spokesman for Sanwa Bank California--a unit of Japan’s Sanwa Bank Ltd. and the fifth-largest bank based in California--said Sanwa would give no quarter to the new, larger Union Bank of California.

The new Union Bank of California would have 262 offices in California, Oregon, Washington and in several foreign countries.

Johnson said the new bank, while already a major lender to Japanese companies that have U.S. facilities, hopes to widen its reach by financing the U.S. operations of companies based in Korea, China and other Asian nations.

The bank also hopes “to assist more American companies [to] get a foothold in Asian countries,” he said.

However, Johnson said Bank of Tokyo and Mitsubishi Bank have no plans to offer a buyout proposal for the 28% of Union Bank held by public investors.

“The public shareholders of Union Bank will become shareholders of the new bank,” he said.

Union Bank’s stock has jumped about 15% since Bank of Tokyo and Mitsubishi announced their merger plan March 28, partly on speculation that Union Bank’s public stock float might be purchased as well. The stock eased 12.5 cents Friday to $39.25 a share on the Nasdaq market.

The banks also said Kanetaka Yoshida, Union Bank’s president and chief executive, will assume the same posts at the new institution. Hiroo Nozawa, chairman and chief executive of Bank of California, will be the new bank’s deputy chairman and chief operating officer.