Commerzbank buys Dresdner Bank for 9.8 billion euros. Photo: Gabriele Röhle, Commerzbank AG.

Commerzbank has agreed to buy the ailing Dresdner Bank from insurer Allianz, in a deal worth €9.8 billion (8bn).

The move means that Dresdner will remain in German hands despite expressed interest from China Development Bank.

Allianz will retain a 30% stake in Dresdner in a two-step transaction to be completed by 2009.

The deal places Commerzbank in prime position to rival Germany’s largest bank, Deutsche Bank. The new combined financial group will have customer numbers that exceed those of Deutsche Bank but in terms of assets, Commerzbank remains a distant second.

Cost-cutting tactics are in place to reduce the losses that Dresdner Bank has suffered in the last few months. Dresdner had taken a heavy blow by the sub-prime crisis and Allianz and Commerzbank will make significant contributions to limit any further losses.

9,000 jobs are also to be axed as a part of the move, with up to 1,200 positions to be cut in the UK as well as the closure of up to 300 branches across Germany.  The cuts are predicted to save €1bn.

Dresdner Kleinwort, the group’s investment bank, is expected to suffer the most with potentially half the staff being laid off.  The Kleinwort name is also likely to be dropped.

The takeover marks an embarrassing loss for Allianz. The €9.8bn price is significantly less than the €14bn the company paid for Dresdner in 2001.