UFJ Holdings, Japan’s fourth-biggest bank, said today it was seeking a takeover by bigger rival Mitsubishi Tokyo Financial Group in a rescue that would create the world’s biggest banking group.

The merger would create a financial giant, with assets of US$1.74 trillion, displacing U.S. financial conglomerate Citigroup, with US$1.32 trillion, from the top global ranking.

UFJ said it aimed to reach a basic agreement with MTFG by the end of the week. MTFG said in a brief statement late on Wednesday that it views UFJ’s proposal favorably.

Investors welcomed the news, driving the Tokyo stock market’s banking sector index IBNKS.up 1.38% despite a 2.17% drop in the benchmark Nikkei average

A takeover will have to overcome major obstacles, however.

Shortly after the plan was announced, Sumitomo Trust & Banking, which had earlier agreed to buy UFJ’s trust bank unit, threatened legal action against UFJ, which was backing out of the sale.