Commerzbank Poised to Buy Allianz’s Dresdner Bank Subsidiary

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Allianz SE is set to sell control of Dresdner Bank to Commerzbank AG, a source with direct knowledge of the matter said on Friday. The deal would fuse Germany’s second and third largest banks.

Taking over Dresdner, which analysts estimate to be worth about €9 billion ($13 billion), will create a group to rival flagship lender Deutsche Bank AG and change the face of banking in Europe’s biggest economy.

The idea is for Commerzbank to take an initial 51 percent stake in Dresdner and buy the rest later, the source said, giving Commerzbank a badly needed leg up in its home market which is dominated by state-owned not-for-profit lenders.

Despite being one of the country’s biggest lenders, Commerzbank is still a lightweight by European standards, with a market value of about €13 billion ($19.13 billion) — less than half that of Frankfurt neighbor Deutsche Bank.

Commerzbank shares fell 2.4 percent to €19.98 ($29.40) by 0812 GMT, the leading decliners among German blue chips, while Allianz shares rose 0.8 percent.

Allianz’s supervisory board will meet on Sunday afternoon and most observers expect it to rubber stamp the disposal of a bank bought amid a fanfare seven years ago but which proved a costly embarrassment for Europe’s biggest insurer.

The architects of the Dresdner takeover in 2001 hoped to sell bank accounts to Allianz customers as well as products such as car insurance at bank branches. Instead the cross-selling failed to produce significant benefits and Dresdner racked up losses of more than €3 billion ($4.42 billion) — most recently thanks to heavy write downs on dud investments.

In June last year Reuters reported that Allianz had begun to consider its options for Dresdner. The resulting jump in the insurer’s share price reflected the degree of investor frustration with the botched takeover.

But finding a buyer has not been easy, mostly because of Dresdner’s accident-prone investment bank — a business, said one insider, which Allianz had never intended to keep. “It was clear from the start to Allianz that they did not want to keep the investment bank,” said the source. “But when the time was right to sell it — at the top of the investment banking boom in late 2006 — they fell asleep at the wheel.”

(Writing by John O’Donnell; Editing by David Holmes)