FRANKFURT, Aug 22 (Reuters) - Commerzbank plans to call a supervisory board meeting late next week to discuss a merger with Dresdner Bank, a source with direct knowledge of the matter said on Friday, signalling movement towards a deal.
Commerzbank <CBKG.DE> has been in talks with insurer Allianz <ALVG.DE> about buying its Dresdner Bank since June but there have been few public signs of life in the negotiations in recent weeks.
Earlier this month, Allianz Chief Executive Michael Diekmannn cautioned against the assumption Dresdner would be sold. Now, however, Commerzbank is planning to call an extraordinary meeting of its supervisory board in a signal that negotiations between the two have reached a critical stage.
The 21-strong supervisory board is Commerzbank's governing body and its approval is required for large deals such as a merger with Dresdner. "I expect there will be a meeting next week about Commerzbank and Dresdner," the source told Reuters, adding, however, that so far no invitations had been sent.
"The talks between both sides are intense although there are a number of hurdles to cross, not least, price," another source close to the negotiations said. Commerzbank and Allianz declined to comment as investors grew enthusiastic about the prospect of a deal. Commerzbank's stock climbed as much as 4.8 percent while Allianz was trading up 3.5 percent at 1335 GMT, putting them among the top gainers on the German stock market <.GDAXI>.
Shareholders hope a sale will end an unhappy marriage. Parent Allianz was once seen as an unshakeable financial powerhouse but is now licking its wounds largely thanks to Dresdner.
The architects of the Dresdner takeover in 2001 had hoped to sell bank accounts to Allianz customers as well as other products such as car insurance over the counter at bank branches.
Instead, Dresdner racked up losses of almost 3 billion euros ($4.5 billion) after the merger as cross-selling floundered. The sale of Dresdner Bank had been thrown into doubt after its earnings collapsed and writedowns from the markets crisis spiralled.
Despite being Germany's second-biggest lender, Commerzbank is still a lightweight on the international stage with a market value of about 13 billion euros -- less than half that of Frankfurt neighbour Deutsche Bank <DBKGn.DE>.
Buying Dresdner, Germany's third-biggest bank, would give Commerzbank a leg up in Europe's biggest economy although it would still lag behind Deutsche. Dresdner's retail business, which analysts estimate is alone worth 8 billion euros, is likely to be sold as a packet with its struggling investment bank.
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