Deutsche, Dresdner banks in merger talks
FRANKFURT: Deutsche Bank AG and Dresdner Bank AG were holding cooperation
talks Tuesday that could create the world's largest bank with more than $1.4
trillion in assets.
The banks declined to comment further. But the announcement fueled
speculation that the two were working on a merger that would push the German
duo past the planned merger among Japanese giants Dai-Ichi Kangyo Bank, Fuji
Bank and the Industrial Bank of Japan.
Those companies agreed in August to merge by 2005, creating a bank with just
over $1 trillion in assets. The European Union Commission - which regulates
business in the 15-member EU - confirmed the banks had approached its merger
unit earlier Tuesday.
While spokesman Jonathan Faull said it isn't yet clear whether a merger
would come under EU scrutiny, it would depend on the size of the combined
companies' income.
"Obviously, they are two large German banks and also banks with large
activity outside Germany," he said.
Deutsche Bank alone is now the largest in the world in terms of assets, with
$840 billion. Dresdner Bank is Germany's No. 3 money lender.
Representatives of both banks continued talks on the potential deal early
Tuesday and were planning special, simultaneous, but separate, supervisory
board meetings Wednesday. The banks scheduled a joint news conference
Thursday morning.
"It can be the case that a merger announcement could come this week, but it
is still unclear where they stand in the negotiations, though it's obviously
advanced," said Volker von Kruechten, an analyst with BHF Bank in Frankfurt.
Germany's Manager magazine reported in an advance copy of this month's
edition that the two banks will merge completely. But Kruechten said
analysts had been pondering such a merger since November.
Kruechten said the deal has its roots in both banks' ambitions to join the
top echelon of global investment banks and asset managers.
"They are both already major world players in asset management and
investment banking. But a merger would put them into the top 5 league," he
said, noting that the two banks control only 10 percent of Germany's retail
banking market.
Deutsche Bank in particular has been aggressive about expanding overseas and
is rumored to be interested in Portugal's Banco Pinto e Sotto Mayor and
South Korea's KorAm Bank. It is also battling for control of Poland's fifth
largest bank, BIG Bank Gdanski. Just last year, it swallowed US giant,
Bankers Trust.
Reports of merger talks with Dresdner came just as Deutsche Bank signed an
agreement Tuesday to bankroll the industrial holdings of Moscow-based AFK
Sistema.
Deutsche Bank is one of the major western creditor banks in Russia, and
presided over the restructuring of $32 billion of private loans extended to
the former Soviet Union by private Western creditors.
In Germany, labor unions raised concern Tuesday that the merger would result
in branch offices being closed and slash nearly a third of the combined
banks' 80,000 jobs.
Part of the plan as reported in Manager is to possibly spin off the banks'
retail services. Deutsche Bank Chief Executive Rolf E. Breuer and his
counterpart from Dresdner Bank, Bernhard Walter, would both stay on as chief
executives of the combined company during the merger period, the magazine
reported.
Shares of Dresdner Bank rose 22 percent at the start of trading in
Frankfurt, before falling back to 54 euros ($51.84). By early morning,
Deutsche Bank shares were also up 8.7 percent to 94 euros ($90.24).
Allianz, which holds significant stakes in both banks, rose 6.4 percent to
361 euros ($346.56).
A complex cross-shareholding structure between Germany's top financial
institutions has long been an obstacle to banking consolidation in the
country. But recent plans by the German government to lift the capital-gains
tax on the sale of industrial holdings is set to change all that.
Deutsche Bank and Dresdner broke off talks last autumn on a linkup of their
retail-banking activities. At that time, Dresdner's Walter reportedly wasn't
willing to settle for less than a 50-50 linkup.
Last year, Dresdner Bank was also rumored to be in talks with Germany's
second biggest bank, Hypo Vereinsbank about a potential merger, which never
materialized. (Associated Press)
For reprint rights: Times Syndication Service
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