Banking Speculation

Insurance giants Allianz, the parent company of the Dresdner, and Germany's number two bank, Commerzbank, have both announced that they will hold extraordinary supervisory board meetings on Sunday, Aug. 31, raising the prospect of a domestic German deal.

While an Allianz spokesman declined to comment on what the insurer's board members will discuss, the meeting in Munich is widely expected to end with an agreement to sell off its troubled banking offshoot Dresdner to Commerzbank for up to 9 billion euros ($13.3 billion).

At the same time, the Commerzbank board will meet in Frankfurt, stoking month-long anticipation of a tie-up between the two banks, which would clear the way for the biggest restructuring of the German banking system in more than seven years.

Chinese bid: higher and might cost fewer jobs

Munich-based Allianz, which is Europe's biggest insurer, is, however, understood to have received a higher offer for Dresdner from the China Development Bank.

Employee representatives on Allianz's supervisory board have signaled their potential support for the overseas rival.

"I would support the CDB if the Commerzbank does not make extensive job security guarantees," Peter Kossubek told the German daily Frankfurter Allgemeine Zeitung. He also said he expected the five other workers' representatives on the 12-member board would share his position.

Service workers' union Verdi has warned that the fusion of Dresdner and Commerzbank could cost between 10,000 and 20,000 jobs -- 20 percent to 25 percent of the workforce.

But some politicians have been less enthusiastic about the prospect of a state-owned Chinese bank taking over Dresdner. Christian Democrat business expert Michael Fuchs told the FAZ that he could not imagine Allianz agreeing to sell a German bank to a Chinese consortium of investors.

He said the consolidation of the German banking sector was necessary, but that this could be achieved without foreign partners. Fuchs added that it was particularly important for an export nation like Germany to possess large financial institutions to look after German businesses.

Stock market likes all-German variation

The news of the Allianz and Commerzbank board meetings triggered a new rally in German finance sector shares with Commerzbank jumping by 1.8 percent to 20.44 euros.

Allianz's shares raced ahead by 3.0 percent to 112.54 euros on hopes that it may have found a solution for Dresdner, which has been badly hit by the global credit crunch and which in turn has taken its toll on Allianz's bottom line.

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.

Allianz, however, is reported to be planning to hold a 30-percent stake in the new merged Dresdner-Commerzbank group with analysts estimating that a Dresdner sale could generate about 9 billion euros for the Munich-based insurer.

Should the companies agree to a merger, Dresdner's investment house Dresdner Kleinwort is expected to face a major restructuring.

Allianz paid $21 billion for Dresdner in 2001 as part of an ambitious plan to sell its pension and insurance schemes through Dresdner's network of more than 800 branch offices.

This is the second time that two of Germany's big banks have attempted to merge. Plans for a corporate marriage between Dresdner and Deutsche Bank, the nation's largest bank, dramatically fell apart in 2000.

The failure of Deutsche and Dresdner to create a new financial powerhouse was seen as a major setback to German bank consolidation.

Three-way merger planned?

Moves by Dresdner and Commerzbank to forge a merger could be part of a prelude to the two banks launching what would be a three-way merger with Deutsche Post to form a new banking powerhouse in Europe's biggest economy with a total of 26.5 million customers.

Deutsche Postbank's parent, the postal and logistics group Deutsche Post AG, has indicated it will decide in the coming months whether to sell off a big stake in its banking arm.

Shares in Postbank also climbed following the announcement of the Dresdner and Commerzbank board meeting, gaining 2.7 percent.