Frankfurt - Germany could be on the brink of a major shakeout in its fragmented banking industry with investors betting Monday on an announcement this week of an 8-billion-euro (12 billion-dollar) merger between two of the nation's leading banks. Indeed, shares in Allianz SE jumped more than 1.0 per cent in early trading Monday on speculation that the German giant insurer could announce this week a deal to merge its troubled banking offshoot Frankfurt-based Dresdner with cross-town rival Commerzbank AG.
A series of newspapers have reported that talks between Commerzbank and Dresdner have entered a critical stage with the reports including outlines of a tie up which would clear the way for the biggest restructuring of the German banking system in more than 7 years.
The Financial Times Deutschland reported that after months of talks the Commerzbank bank board is set to reach a decision on the merger by the end of the week.
"It must now some to an end - one way or the other," Germany's weekly Welt am Sonntag quoted a company official close to the negotiations with the newspaper also saying that the two banks had agreed to a structure for the transaction.
However, neither Dresdner Bank nor Commerzbank, which is Germany's second biggest listed bank, were prepared to comment on the talks, which have been the subject of continuing speculation since Allianz announced in March plans to sell off its banking operation.
Either way, shares in Allianz jumped 1.4 per cent to about 109 euros Monday on hopes that it may have found a solution for Dresdner, which has been badly hit by the global credit crunch.
This in turn has taken its toll on Allianz's bottom line and undercut its share price.
Earlier this month Allianz announced the company had been forced to abandon its earnings forecast in the face of tough financial markets.
While Welt am Sonntag said Allianz would hold a 30-per-cent stake in the new merged Dresdner-Commerzbank group, analysts estimate that a Dresdner sale could generate about 8 billion euros for the Munich-based insurer.
Under the merger deal, Dresdner's investment house Dresdner Kleinwort would also face a major restructuring.
But company sources have also indicated to the Deutsche Presse-Agentur
