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German banks eye tie-up
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August 23, 1999: 4:04 a.m. ET
Deutsche, Dresdner in talks to combine retail operations; 8,000 jobs could go
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LONDON (CNNfn) - Shares in Germany's Deutsche Bank and Dresdner Bank jumped Monday after the pair confirmed talks which could lead to combining their retail banking units but would stop short of a full-scale merger.
Deutsche, the world's largest bank in terms of assets, and Dresdner, the German number three, are looking to spin off some of their retail banking interests into a separate holding company in which each would hold a 50 percent stake.
With banking consolidation spreading rapidly through Europe, Germany remains the most fragmented market in the European Union. The four largest banks hold less than 20 percent of the total retail market, with the balance split between hundreds of local state-owned savings banks.
This compares with domestic market shares of more than 60 percent held by the four largest banks in France and the United Kingdom.
The two banks said Monday that the preliminary talks have focused on technical co-operation, with one source suggesting that future discussions could focus on combining their direct banking arms rather than main street networks.
Deutsche, which reports first-half results Wednesday, had previously announced plans to combine all of its existing retail operations into Bank 24, its own direct banking arm.
A broader alliance of bank branches could lead to up to 8,000 job cuts, according to German media reports. Deutsche operates 1,600 branches and Dresdner 1,400. Each has about 6 million retail customers.
Deutsche (FDRB) shares added 2.6 percent in early trading Monday while Dresdner (FDRB) soared more than 6 percent to 44.20 euros.
Separating the low-margin retail business from more profitable investment banking and asset management services would allow both banks to focus on becoming global players in these areas.
Deutsche has already declared its global ambitions with the purchase of Bankers Trust while Dresdner has been looking for a U.S. acquisition to boost its reach in North America.
Both banks said that they had held talks with a number of competitors, with Dresdner stating that it would consider a link with HypoVereinsbank, the German number two, if the Deutsche talks fail to lead to a deal.
Commerzbank, the number four player in Germany, said it was not involved in the talks and was concentrating on commdirect, its own telephone-based unit which plans to expand to Britain, Italy and Spain next year. The bank also plans to float commdirect next year.
-- from staff and wire reports
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