Brave new dawn at Dresdner Kleinwort?

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Bankers at Dresdner Kleinwort have reason to feel radiant: they might not be horribly massacred in a merger with a rival after all.

The bearer of the good news is an article which appeared in this week's Financial News.

According to said tract, Allianz (which owns Dresdner K) now plans to spin off its commercial and retail banking arm rather than Dresdner Kleinwort, leaving Dresdner K's investment bankers sitting pretty.

"Once the retail business is spun off, a standalone investment bank will remain, but with the ratings, balance sheet and capital guarantees of Dresdner Bank," the paper said.

Bankers at Dresdner Kleinwort appear excited at the prospect. "Most people see this as a positive thing," says one. "It would allow us a lot more flexibility - we could forge a stronger relationship with Allianz, or Allianz could bring in a strong counterparty [AKA a Chinese or Russian bank/sovereign wealth fund] to be a part owner of Dresdner Kleinwort."

Simon Maughan, an analyst at MF Global, and former Dresdner K employee, says it's particularly good news bearing in mind the alternative. "For umpteen years it's always been the investment bank that would be sold off and purchased by a rival, upon which all the staff would be scorched."

Financial News points out another advantage of spinning off Dresdner's commercial and retail division - the investment bank would be free of the costs associated with it.

The Dresdner banker confirms this has been a source of angst: "We have huge overheads in Germany and we can't do anything about them because of German labour laws."

But while profits should rise and Dresdner Kleinwort bankers may be more secure in their jobs if the commercial bank goes its own way, bonuses won't necessarily be any bigger. "Dresdner Kleinwort has always made significantly less than the minimum return expected by Allianz," says Maughan. "It owes Allianz, so don't expect a massive bonanza in bonuses just because profits increase."

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