“J.P. Morgan Chase & Co. boldly joined the consolidation wave sweeping the nation’s financial industry, in a deal that would bring it not only a large regional bank, but also a future chief executive officer,” writes Jathon Sapsford in today’s Wall Street Journal.

“J.P. Morgan plans to take over Bank One Corp. for roughly $58 billion in stock, forming the second largest bank in the U.S. The newly created colossus would have loans and other assets of $1.1 trillion. J.P. Morgan, the acquirer, described the transaction as a merger of equals.”

“The deal is the latest indication of a strongly held belief among the nation’s top bankers: Size matters. Bolstering that conviction is the success of Citigroup, which has $1.2 trillion in assets.”

“Being huge offers significant advantages. For starters, large clients like being able to have all their financial work — loans, underwriting, and mergers and acquisitions — handled in one place, because this gives them leverage to reduce their costs.”

“Scale matters most of all in the burgeoning business of consumer finance. Citigroup and a handful of competitors have proved that lending to consumers — via credit cards, mortgages or automobile financing — can turn a lumbering institution into a growth business. U.S. consumers’ relentless appetite to buy on credit has offered Citigroup, for example, steady growth to help it weather the ups and downs of the corporate side of the financing business. A big consumer franchise also reduces the risks of areas such as trading or derivatives, because it lowers the relative size of those businesses.”

“The combined bank will retain the J.P. Morgan name and be headquartered in New York. Its consumer-services businesses will remain based in Chicago, where Bank One is headquartered. The deal is subject to regulatory approval. Although a competing bid for Bank One — or J.P. Morgan, for that matter — is possible, such bids are considered highly unlikely given the size of the deal, according to those familiar with it.”

“The merger agreement, which was announced late Wednesday after it had first been reported by the Wall Street Journal Online, solves a succession issue for J.P. Morgan. It had no obvious plans for replacing Chief Executive William B. Harrison Jr., who is 60 years old. Under the deal’s terms, Mr. Harrison will cede the post of chief executive to Bank One Chairman and Chief Executive James Dimon in 2006, though Mr. Harrison will stay on as chairman.”

http://online.wsj.com/article/0,,SB107414340290083200,00.html