Two of Japan's largest banks, Mitsubishi Tokyo Financial Group Inc. and UFJ Holdings Inc., agreed Thursday to a merger that would form the world's biggest bank.

The banks' presidents said the integration of holding companies, banks, trust banks and securities companies would be completed by Oct. 1, 2005, subject to government approval. Financial terms were not disclosed. Mitsubishi Tokyo previously had offered UFJ as much as $6.3 billion for UFJ Holdings.

The holding company would be called Mitsubishi UFJ Holdings, with specific stakes to be determined later, both sides said. UFJ Holdings President Ryosuke Tamakoshi would become chairman of the new holding company and Mitsubishi Tokyo President Nobuo Kuroyanagi would become president, they said. Branch closings and job cuts were not discussed.

With combined total assets of about $1.7 trillion, the combination of UFJ and Mitsubishi Tokyo would create the world's largest bank in terms of assets. U.S.-based Citigroup Inc., which had been the world's largest, had $1.4 trillion at the end of the second quarter.

The announcement came a day after the Tokyo High Court reversed a July 27 decision by a lower court ordering a halt to merger talks between the banks.

Another bank, Sumitomo Trust, sought an injunction against the merger, citing an earlier agreement it had to buy UFJ's trust banking operations. UFJ scrapped that deal when it began negotiations with Mitsubishi Tokyo last month.

Sumitomo says the trust banking deal is legally binding and is appealing to Japan's Supreme Court.

Complicating the issue, another bank is courting Osaka-based UFJ -- Sumitomo Mitsui Financial Group, which includes Sumitomo Trust. Sumitomo Mitsui put in a bid earlier this week.

Mitsubishi Tokyo said late Wednesday that it was ready to offer as much as $6.3 billion to help struggling UFJ. Sumitomo Mitsui had offered $4.5 billion.

Kuroyanagi denied that Sumitomo Mitsui's offer had affected Thursday's deal. Much of it was already decided, but the announcement had to be postponed because of the court proceedings, he said.

Tamakoshi said he chose Mitsubishi Tokyo over Sumitomo Mitsui not solely because the money offer was greater but mainly because he had been in talks with Mitsubishi Tokyo first. But he also said that UFJ had carefully considered the Sumitomo Mitsui offer, including its possible value for investors.

Standard & Poor's Ratings Service said Thursday that a capital injection from Mitsubishi Tokyo would strengthen UFJ's creditworthiness, but the financial risk could increase for Mitsubishi Tokyo. It kept both banks on credit watch with negative implications, citing the Supreme Court appeal by Sumitomo Trust as an uncertainty.

UFJ Holdings President Ryosuke Tamakoshi, left, would chair the merged banks. Mitsubishi Tokyo CEO Nobuo Kuroyanagi would be president.