Chemical Banking Corp. and the Chase Manhattan Corp. today 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, 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. {Details on Page D1.}

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 and shares in both companies climbed about 10 percent today.

"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 bank 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.

The cutbacks will affect bank employees in 39 states and 51 countries. The new company plans to close about 100 of the 600 Chemical and Chase branches in the New York area. Shipley insisted, however, that the new bank would continue to serve all its neighborhoods and keep fees low in what would still be a very competitive industry.

Chemical, the nation's fourth-largest bank in terms of assets, and Chase, the nation's sixth-largest, will move ahead of the current industry leader, Citicorp, which has $257 billion in assets, if the merger proceeds as planned in the first quarter of 1996. The plan must be approved by regulators and stockholders.

The merging banks said the new company would rank first in global loan syndications, global custody of pension fund investments, international electronic money transfers and overseas trading revenue. In the U.S. market it would rank first in mortgage servicing, fourth in credit cards and first among banks in financing luxury automobile purchases.

The new bank will rank 20th in assets in the world. Earlier this year the Bank of Tokyo and Mitsubishi Bank announced they would merge to form the world's largest bank, with more than $750 billion in assets.

Three of the five principal executives of the new Chase will be former Chemical officers, and the bank will take the Chemical offices at 270 Park Ave. here as its headquarters. Chase's current chairman and chief executive, Thomas G. Labrecque, 56, is to become president and chief operating officer of the new bank.

Shipley said he was willing to "swallow" losing Chemical's name in the merger because the Chase Manhattan name -- made famous by its long association with the Rockefeller family -- was much better known than Chemical outside New York and abroad.

Rockefeller family members still own Chase stock, and former Chase chairman David Rockefeller still chairs the bank's international advisory committee. Shipley said he called Rockefeller in Maine this morning to tell him it was an honor to be associated with him.

Gregg Novek, senior vice president of the bank rating service Thomson BankWatch Inc., said Chemical executives are particularly well prepared to use the merger to boost earnings because of their successful merger with Manufacturers Hanover Corp. in 1991. "They are going to have very strong market share positions in very desirable businesses," Novek said.

Howard B. Adler, an attorney and banking merger expert at the law firm Gibson, Dunn & Crutcher, said the deal helps both companies and "is close to, if not exactly, a merger of equals."

Shipley said he had no plans to use the bank's new muscle to try to compete in areas where it is now weak, such as Washington. Adler said that sort of geographic expansion was not the kind of thing that would win the new Chase the earnings it seeks.

Alfred F. Kugel, senior investment strategist at Stein, Roe & Farnham Inc. in Chicago, said investors had been pushing banks to consolidate and the industry was responding. "For a long time the U.S. was over-banked compared to any other country I know of," he said. "You can close a lot of branches if you have overlap, and these two banks do. Everybody wins except the employees who get laid off."

U.S. banks have announced a record $25 billion in mergers through July of this year. More were unveiled today. Cleveland-based National City Corp. and Pittsburgh-based Integra Financial Corp. announced a $2.1 billion merger. First Nationwide Bank of Dallas agreed to buy SFFed Corp., the holding company for San Francisco Federal Savings, for $250 million. And Fifth Third Bancorp. of Cincinnati agreed to acquire Kentucky Enterprise Bancorp. for $64.3 million.

More such deals are expected. "I would be surprised if there weren't conversations like this going on across the country," Labrecque said. "This is the nature of the times we are in."

Chase stock climbed $6.62 1/2 to close at $59.62 1/2 today. Chemical stock increased $5.75 to $60.12 1/2.

Price, famous for finding unseen bargains in the stock market, said he was glad he saw Chase's potential and felt like the "guy who asked the pretty girl to dance before any one else did." Now, he said, "Walter Shipley taps me on the shoulder, but that's okay." BIGGEST BANKS Yesterday's merger would push Chase to first from sixth among U.S. banks. Bank


(IN BILLIONS) Chase Manhattan

$297.3 Citicorp

257.0 BankAmerica

226.6 NationsBank

184.2 J.P. Morgan

166.6 CAPTION: Chase Manhattan's current headquarters in New York. SOURCE: Bloomberg Business News IN PROFILE CHASE MANHATTAN Bank: Sixth-largest U.S. bank Assets: $118.7 billion 1994 net income: $1.20 billion Employees: 33,535 Branches: 324 CHEMICAL BANK Rank: Fourth-largest U.S. bank Assets: $178.5 billion 1994 net income: $1.29 billion Employees: 42,130 Branches: 297 BIGGEST U.S. BANK MERGERS Banks



(in billions) Chemical-Chase Manhattan


$10.0 First Union-First Fidelity

June 1995

$ 5.4 First Chicago-NBD

July 1995

$ 5.3 * BankAmerica-Security Pacific Aug. 1991

$ 4.7 NCNB-C&S Sovran

July 1991

$ 4.5 * Estimate of stock swap value; all other values were announced by participants. SOURCES: Associated Press, Securities Data Co.