WASHINGTON The U.S. Federal Reserve on Tuesday slashed a key interest rate by the biggest amount in more than 23 years in an emergency bid to head off a U.S. recession and halt a global rout in stocks.
FRANKFURT Allianz (ALVG.DE) is set to sell Dresdner Bank to Commerzbank (CBKG.DE) in a deal that will fuse Germany's second- and third-biggest lenders, sources with direct knowledge of the matter said on Friday.
The deal, to be announced as soon as this weekend, will see Commerzbank take a 51 percent stake in Dresdner and buy the rest later, the sources said. Allianz issued a brief statement, saying only that it was in talks about Dresdner Bank.
Taking over Dresdner, which analysts estimate to be worth about 9 billion euros ($13 billion), will create a group to rival flagship lender Deutsche Bank (DBKGn.DE) and change the face of banking in Germany, Europe's biggest economy.
It will give Commerzbank a badly needed leg up in its home market which is dominated by state not-for-profit lenders and allow Allianz to end an unhappy marriage that unsuccessfully tried to match investment bankers with insurance salesmen.
The Verdi trade union reckons the deal could result in the loss of up to 12,000 jobs, cuts which would have been avoided had Allianz chosen to sell to another would-be buyer, China Development Bank CHDB.UL.
Allianz's supervisory board will meet on Sunday afternoon and most observers expect it to rubber stamp the disposal of a bank bought amid fanfare seven years ago but which proved a costly embarrassment for Europe's biggest insurer.
Architects of the 24 billion euro Dresdner takeover hoped to sell bank accounts to Allianz customers as well as products such as car insurance over the counter at bank branches.
Instead, Dresdner racked up losses of more than 3 billion euros, most recently thanks to heavy writedowns on dud debt 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," this person said.
"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."
The sale will beef up Commerzbank. Despite being one of the country's biggest lenders, it is still a lightweight by European standards, with a market value of about 13 billion euros -- less than half that of Frankfurt neighbor Deutsche Bank.
It casts a cloud of uncertainty over Dresdner Kleinwort, the fallen star of investment banking. Commerzbank Chairman Klaus-Peter Mueller wound up its own investment bank after heavy losses.
Commerzbank shares fell 1 percent to 20.20 euros by 1304 GMT, making them the biggest decliners among German blue chips .GDAXI, while Allianz shares rose just slightly.
(Editing by Quentin Bryar)