Bank Merger Would Create a Powerhouse

Deutsche Bank, the world’s biggest bank, said Tuesday it was holding talks with rival Dresdner Bank amid reports it is seeking a merger to create a banking colossus with more than $1.2 trillion in assets.

A deal between the two banks would create an institution even larger than the planned merger involving Japanese giants Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan. Those companies agreed in August to combine by 2005 to create a bank with just over $1 trillion in assets.

Analysts said a merger of the German institutions would help them join the top echelon of worldwide investment banks, an ambition of both.

“They are both already major world players in asset management and investment banking. But a merger would put them into the top-five league,” said Volker von Kruechten, an analyst with BHF Bank in Frankfurt.

Deutsche Bank is already the world’s largest in terms of assets, with $840 billion, and Dresdner Bank is Germany’s No. 3 money lender. But together the two banks control just 10% of Germany’s retail banking market.

Although the banks declined to give details on the talks, they said they were planning simultaneous but separate supervisory board meetings today. They will hold a joint news conference Thursday.

The European Commission, which regulates business in the 15-member European Union, confirmed that the banks had approached its merger unit, but gave no details.

Labor unions in Germany, meanwhile, expressed concern that the merger would result in branch offices being closed and the loss of nearly a third of the combined banks’ 80,000 jobs.

Rumors of a deal pushed American depositary receipts of Deutsche Bank up $8.25 to close at $91.50 and Dresdner ADRs up $8.50 to $54.25.