German banks may face new wave of mergers

GERMANY'S BANKING sector may be facing a new wave of mergers and acquisitions with reports that Commerzbank, the number two by assets, is mulling a takeover of Allianz subsidiary Dresdner Bank.

The Handelsblatt newspaper reported yesterday that the two companies are studying each others' books with a view to a deal.

"You could call it due diligence. The process is gradually picking up momentum - all parties want to arrive at a result quickly," said an unnamed source familiar with the negotiations to Handelsblatt.

The news comes a week after rumours that Allianz and Commerzbank were considering a joint offer for Postbank, Germany's largest retail bank, currently owned by Deutsche Post.

The credit crises have prompted Germany's banks once again to consider consolidation to boost market shares which are tiny by European standards. For months, Allianz has been working towards splitting up Dresdner's retail and investment branches ahead of a possible sale, eight years after snapping it up from under the nose of Commerzbank.

Allianz sources told Reuters yesterday that it could sell its entire Dresdner banking operation "if there is a good offer". Commerzbank is also studying the books of Citibank's troubled German subsidiary for a possible takeover.

Yesterday France's Crédit Mutuel confirmed it had also made an offer for Citibank.

Shares in Commerzbank rose over 5 per cent as a company spokesman tried to play down the significance of the speculation. "There is neither wedding preparations nor an engagement," said spokesman Achim Kassow.Any sale by Allianz could be complicated by the effects of the subprime credit crisis, which cost investment bank Dresdner Kleinwort about € 2.5 billion.

A Dresdner source told Die Welt newspaper yesterday that the only way Allianz can hope to sell Dresdner, with its estimated book value of € 12 billion, is with a guarantee to cover any further sub-prime debts that have yet to emerge.

Before any Commerzbank-Dresdner deal, though, Postbank is likely to be sold. Germany's biggest private bank is likely to attract offers from Commerzbank and Deutsche Bank, as well as Britain's Lloyds and Spain's Santander.