Commerzbank and Dresdner Bank are in advanced talks about a merger that would tie together two of Germany's biggest banks, a source from Commerzbank's supervisory board said on Friday. Germany has been in the grip of frenzied merger speculation for weeks with a string of banks looking for a bidder or a merger partner.
Dresdner's parent Allianz wants to sell it to Commerzbank. Meanwhile, the country's biggest retail lender, Deutsche Postbank, is up for sale. Citigroup, too, is searching for a buyer for its German retail business. "It is a sign of how serious we are but we should remember that eight out of ten deals fail at this point," the source told Reuters of the Commerzbank-Dresdner talks.
"Due diligence is the second phase of a merger negotiation. Then comes the contract negotiations and finally signing." A deal between Commerzbank and Dresdner would be the biggest in Germany since UniCredit swooped on Bavarian bank HVB three years ago.
It would solve Allianz's long-running spat with investors who have been angry about what they see as a failed attempt to combine insurance and banking. And it would give a leg up to Commerzbank, which has long floundered with a tiny share of Germany's overcrowded banking sector.
Together, they would have a better chance of squaring up to their biggest competitors - the country's not-for-profit community savings banks. And they could share the international stage with the country's flagship Deutsche Bank. Despite being Germany's second-biggest lender, Commerzbank is still a lightweight among international peers with a market value of about 13 billion euros ($19.93 billion).
But there are a number of obstacles to a deal including Dresdner's struggling investment bank. Allianz wants to sell this together with Dresdner's attractive retail bank, which analysts estimate is alone worth 8 billion euros.
One source familiar with the matter said that the insurer saw little prospect for a separate sale of the investment bank, which has had to make heavy writedowns amid global market turmoil. It is unclear what Commerzbank, which all but closed down its own troubled investment bank years ago, would do with the outfit.
"The bankassurance business has brought Allianz little happiness," said Konrad Becker, an analyst with Merck Finck. "I don't think it will come to a sale but rather to a fusion. It would be possible to start a totally new bank into which Commerzbank and Dresdner could be brought." "If Allianz were to take over the risks in the investment bank, that would be an acceptable solution for Commerzbank.
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