Allianz, Commerzbank reach Dresdner sale deal

Business Materials 31 August 2008 10:04 (UTC +04:00)

Germany's Commerzbank AG and Allianz SE are expected to announce Sunday a deal worth up to 9 billion euros (13 billion dollars) to sell the giant insurer's banking offshoot, Dresdner, to Commerzbank.

The supervisory boards of Allianz and Commerzbank are to meet Sunday and are widely predicted to sign off on a merger between the two banks, which would be the biggest restructuring in the German banking system in more than seven years, the dpa reported.

With total assets of about 1.09 trillion euros and 12.2 million customers, forging a new merged Commerzbank-Dresdner bank would result in a major reshaping of Germany's fragmented banking sector and the emergence of new banking force in the nation.

However, Deutsche Bank AG, which failed in a bid to merge with Dresdner eight years ago, would remain the largest bank in the country with assets totalling 1.99 trillion euros.

Sunday's expected announcement is the climax of months speculation about a tie-up between Dresdner and Germany's second biggest listed bank which was triggered by Allianz's announcement in March than it planned to sell off its banking operation.

But the talk of the merger has already set the alarm bells ringing among unions amid concerns that a corporate marriage between the two banks could lead to job cuts of at least 10,000 from the financial houses' combined workforce of more than 50,000 employees.

Many of the around 1,800 branches offices of a combined Dresdner- Commerzbank bank are located close to each other.

Under the Commerzbank deal, Dresdner's investment house Dresdner Kleinwort is also expected to face a major restructuring.

The negotiations over the possible sale of Dresdner to Commerzbank have also been held against the backdrop of worries about the impact on both banks of the fallout from the US subprime mortgage market crisis.

While Dresdner this month posted its fourth consecutive quarterly loss in the three months to the end of June, Commerzbank's mortgage group Eurohypo has been forced to beef up its loss provisions.

Allianz paid about 23 billion euros for Dresdner in 2001 as part of an ambitious plan to sell its pension and insurance schemes through Dresdner's branch network.