German giant Deutsche Bank already
the world's richest confirmed plans Thursday to get even bigger by
merging with rival Dresdner Bank in a deal to create a global
powerhouse with more than $1.2 trillion in assets.
The deal must still be approved by each bank's supervisory
boards, but is expected to go through by July 1. The merger brings
together Germany's biggest bank and its No. 3 player, and could
trigger an international grab for partners in the banking sector.
As the Deutsche-Dresdner deal was being announced, the Berlin
daily Die Welt reported that Britain-based HSBC Holdings was eyeing
a buyout of Commerzbank AG, Germany's fourth-largest bank.
Commerzbank declined comment on what it called market
Most of the recent megabank deals have been within national
borders, although Deutsche Bank swallowed New York-based Bankers
Trust last year to claim the No. 1 spot in terms of assets, with
Another pending deal involving Japanese giants Dai-Ichi Kangyo
Bank, Fuji Bank and the Industrial Bank of Japan, with roughly $1.3
trillion in assets, would top the combined Deutsche-Dresdner
merger, but it will not be completed until 2005.
While the German banks called Thursday's deal a "merger of
equals," Deutsche Bank will be the dominant partner, holding
between 60 percent and 64 percent of the combined banks and
Dresdner the rest. The two banks also plan to spin off their retail
unit in the next three years.
The merger is expected to save the company $2.8 billion by
wiping out overlapping operations.
Streamlining those services could entail closing a third of
their combined 3,800 branches and laying off 16,500 of their
146,000 employees, Deutsche Bank supervisory board member Gerhard
Renner, representing union employees, said Wednesday.
Deutsche Bank may also close Dresdner's investment banking arm,
Dresdner Kleinwort Benson, according to a report Thursday in the
Financial Times. That could wipe out another 6,000 jobs for
investment bankers and administrative positions.
Deutsche Bank has its own investment banking arm, Deutsche
Deutsche Bank's chief executive Rolf Breuer and Dresdner's
Bernhard Walter will be co-chief executive officers of the new
bank, which will retain the name Deutsche Bank AG while adopting
Dresdner Bank's green corporate color over Deutsche's blue.
The new bank would focus on investment banking, an area
traditionally dominated by U.S. investment houses. Analysts say
that is a more profitable sector than retail banking.
"The merger with Deutsche Bank will increase their ability to
compete with `bulge bracket' banks like Citigroup and Goldman
Sachs," said Daljit Singh, a bank analyst with Jones Day in
London. "Both Deutsche and Dresdner have been trying to expand in
the United Kingdom and United States for a long time. The merger
will allow them to combine resources and expand more rapidly."
Despite the job losses, German politicians generally welcomed
the merger as an overall plus for Germany. Ditmar Staffelt, a
spokesman for the governing Social Democratic party, said it would
strengthen the country's standing as a center of international
finance, the Frankfurter Allgemeine Zeitung reported Thursday.
The retail activities of both institutions will be merged into
Deutsche Bank 24, which will go public within the next three years.
The Munich-based insurance giant and holding company Allianz AG
will take a minority stake in the retail bank and will also manage
Deutsche Bank's insurance activities and take over the DWS-Group,
the bank's asset management branch.
The shake-up in German banking was made possible in part by
Allianz, which holds major stakes in each bank. It will increase
its stake in the spun-off retail services in several stages.
That would allow Allianz to exploit the spun-off unit, to be
called Bank 24, as a channel to sell investment and insurance
services to nearly 10 million customers.