Merger to make banking giant

CHICAGO (AP) — J.P. Morgan Chase & Co. and Bank One Corp. announced yesterday they would merge in a deal that would create the second-largest U.S. banking company after Citigroup.

The company, to retain the J.P. Morgan Chase name and be based in New York, would have assets of $1.1 trillion with 2,300 branches in 17 states, the two banks announced after the stock market closed.

Only Citigroup, with assets of about $1.19 trillion and operations in more than 100 countries, would be bigger if the deal is approved.

The agreement was unanimously approved by the boards of directors of both companies, J.P. Morgan Chase and Bank One said in their joint announcement.

J.P. Morgan Chase’s William B. Harrison, 60, would be chairman and chief executive officer, while Bank One CEO James Dimon would be president and chief operating officer.

The 47-year-old Mr. Dimon would succeed Mr. Harrison as CEO in 2006, with Mr. Harrison continuing to serve as chairman.

Initial reports of the deal sent Bank One shares soaring in after-hours trading.

Shares in Bank One jumped 10 percent in heavy after-hours activity after closing up 61 cents at $45.22 on the New York Stock Exchange.

J.P. Morgan shares were down 4 percent in after-hours trading after closing at $39.22, up 32 cents.

“It’s a blockbuster of a transaction,” said analyst Denis Laplante, who monitors Bank One for Keefe, Bruyette & Woods Inc.

“J.P. Morgan gets diversification out of capital markets into retail banking, and Dimon gets to run the combined company with the brokerage capability he was coveting.”

An acquisition of Bank One doesn’t come as much of a surprise.

After Bank of America Corp. announced in October it planned to merge with FleetBoston Financial Corp., which would create the nation’s second-biggest banking company, there immediately was talk that Bank One could be a candidate for similar action.

But Mr. Laplante said he did not think the Bank of America-Fleet deal was the trigger.

“J.P. Morgan probably found after the tech bubble that it needed to diversify. It acknowledged on a couple of occasions the desire to build a more national retail branching network.”

Bank One, meanwhile, “wanted a more diversified model out of retail,” he said.

The Federal Reserve still must approve the merger of Bank of America Corp., based in Charlotte, N.C., and FleetBoston. Shareholders of record will vote on the deal Jan. 26 in Charlotte.

The combined bank would have assets of about $966 billion, according to the American Banker trade daily.