US banking giant Chase Manhattan is to take over JP Morgan, one of Wall Street's few remaining independent investment banks.

The $33.2bn deal creates one of the world's largest banks with about $660bn in assets and combines two of the oldest and most prestigious financial names in the US.

Fears have now started to emerge that there may be job losses in London, where the two banks have some overlap.

JP Morgan has so far sought to play down fears of job losses. "There is bound to be overlap, especially in the fixed income side, so there will be some trimming to do. But you will be left with a very dominant player," a spokesman said.

"Savings will come from rationalising buildings, systems, inevitably some people will have to go from the front office, certainly on the fixed income side," he added.

JP Morgan employs 3,500 people in the City of London while Chase Manhattan employs 8,500 people in the UK.

The deal is the latest in a series of global banking mergers, as banks link up to compete in an industry shaken by the growth in internet banking and globalisation.

The deal catapults Chase Manhattan into the top league of investment banking and strengthens its position in European banking.

The new bank's name will be JP Morgan Chase and company.

Rumours that JP Morgan was set to be taken over have pushed its shares nearly 70% higher since June.

In early trading on Wednesday, Chase saw its shares drop more than $6 to $49, while shares in JP Morgan rose slightly to $178.25.

Prime target

JP Morgan controls assets worth about $266bn, and has long been rumoured to be a take-over target.

The firm is famous for its lucrative money management unit, its top brand name and global reach. Created in 1854, it built its name as the bank that financed the US expansion in railroads, steel, mining and utilities.

Germany's Deutsche Bank had previously been tipped as a buyer. Some speculation existed on Wednesday that Deutsche Bank may issue a counterbid for the JP Morgan, but the German bank has declined to comment on this speculation.

Chase Manhattan is about twice as large as JP Morgan, and one of America's largest banks in terms of assets.

It offers commercial, consumer, and investment banking services.

One of the largest mortgage banks in the US, Chase Manhattan is short on nationwide reach, though, with its network concentrated in Texas and the Northeast.

"It is a good potential fit because there are quite a lot of areas where the two are complementary," Ron Mandle, a banking analyst at Sanford C.Bernstein said.

In the new bank, JP Morgan will handle investment banking, wealth management, institutional asset management and private equity services.

The retail business will operate under the Chase name. This will include credit card, mortgage banking and regional consumer banking in New York and Texas.

Banks consolidate

The takeover is the latest in a series of global banking mergers.

Credit Suisse Group recently bought US investment bank Donaldson, Lufkin and Jenrette for $13.4bn.

UBS, another Swiss banking giant, paid $11bn for Paine Webber.

Germany's third largest bank, Dresdner Bank, is reportedly in talks to buy US investment bank Wasserstein Perella.

And Chase Manhattan itself bought UK investment bank and fund manager Robert Fleming for �4.88bn ($7.73bn) in April this year.