Allianz, Commerzbank reach Dresdner sale deal (2nd Lead)

Frankfurt - The board of giant German insurer Allianz SE agreed on Sunday to sell off its troubled Dresdner banking offshoot to rival Commerzbank AG in deal triggering a major reshaping of the country's fragmented banking business, Welt Online reported. Analysts expect Commerzbank to pay up to 9 billion euros (13 billion dollars) to buy Dresdner with Welt Online saying Allianz and Commerzbank negotiating teams reached a deal at a late night meeting on Saturday. A separate meeting of Commerzbank's supervisory board was also predicted to sign off on merging Germany's second and third biggest banks. With total assets of about 1.09 trillion euros and 12.3 million German customers, forging a new Commerzbank-Dresdner bank will result in the emergence of new banking force in Europe's biggest economy. However, Deutsche Bank AG, which failed in a bid to merge with Dresdner eight years ago, would remain the largest bank in the country with assets totalling about 2 trillion euros. But the talk of the merger has already set the alarm bells ringing among unions amid concerns that a corporate marriage between the two banks could lead to job cuts of at least 10,000 from the financial houses' combined workforce of about 72,000 employees. Many of the around 1,900 German branches offices of a combined Dresdner-Commerzbank bank are located close to each other. According to media reports, under the deal, Frankfurt-based Commerzbank will buy the 136-year-old Dresdner in two steps, starting by acquiring 51 per cent of its cross-town rival this year and the rest in 2009. Sunday's announcement will be the climax of months of speculation about a tie-up between Dresdner and Germany's second-biggest listed bank which was triggered by Allianz's announcement in March that it planned to sell off its banking operation. The Commerzbank-Dresdner agreement is also likely result in a shakeout at Dresdner's struggling investment house Dresdner Kleinwort, which has been badly hit by the global financial market crisis and the credit crunch. Indeed, 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. While Dresdner this month posted its fourth consecutive quarterly loss in the three months to the end of June, Commerzbank's mortgage group Eurohypo has been forced to beef up its loss provisions. Allianz paid about 23 billion euros for Dresdner in 2001 as part of an ambitious plan to sell its pension and insurance schemes through Dresdner's branch network.