Germany’s Allianz is in talks about the future of its Dresdner Bank unit and sees a real chance for banking consolidation in Germany, its chief executive said on Wednesday in remarks that boosted German bank shares.
“Discussions are currently taking place, although these have not yet reached the stage where I should like to report on them today,” Michael Diekmann said in the text of a speech prepared for the group’s annual shareholder meeting.
Allianz is splitting Dresdner Bank into two legally separate business segments, one for private and corporate clients and one for its Dresdner Kleinwort investment banking activities, which it aims to complete by the end of the year at the latest.
The move, announced earlier this year, to prepare Dresdner to play a role in German banking consolidation, has spurred speculation about possible tie-ups among the country’s commercial banks, long hampered by tiny market shares at home that have undermined their ability to compete abroad.
Dresdner, or parts of it, is not the only bank potentially up for grabs in Germany. The country’s biggest retail bank, Deutsche Postbank, is expected to by sold by majority owner Deutsche Post, while Citigroup is considering selling its Citibank German retail business.
Shares in the country’s largest bank, Deutsche Bank and No. 2 lender Commerzbank turned positive following Diekmann’s remarks on Wednesday. Both banks are seen as possible consolidators in Germany, and both have already expressed an interest in Postbank.
Allianz shares fell 0.7 percent to €128.21 ($202) by 0903 GMT, while the DJ Stoxx index of European insurers fell 0.8 percent.
Analysts and the media have speculated about possible three- or four-way mergers in Germany, but there have been few signs of concrete direction so far.
“Everyone is talking to everyone,” Allianz’s finance chief Helmut Perlet said earlier this month.
Diekmann told shareholders he did not want to make further comment on his Dresdner plans so as not to compromise the insurer’s negotiating position. “This step coincides with the first apparently realistic possibility of a significant consolidation process on the German banking market,” he added.
Allianz has worked hard to put Dresdner right after the bank ran up billions of euros in losses shortly after the insurer bought it in 2001.
Pressure to sell the bank surged again when the global credit crisis forced Dresdner to write billions of euros off the value of its risky structured finance investments.
Diekmann said he was confident that Allianz would achieve a good operating result in 2008 because of its strong insurance business, despite expectations that it would be a tough year, with the banking business unable to meet its planned earnings contribution. Europe’s biggest insurer made record operating profit of 10.9 billion euros ($17 billion) last year.
Allianz has entered into a strategic partnership with HSBC, in which Europe’s biggest bank will mediate property and casualty insurance business in Europe, the Middle East and Asia-Pacific, Diekmann said.
( editing by Will Waterman)
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