BERLIN -- In the wake of the massive breakup of
, many of the Continent's investors are sure to stay focused on financial stocks in the coming week as the repercussions of the failed $28.7 billion merger continue to reverberate throughout the sector.
The dissolution of the proposed Deutsche-Dresdner union has increased speculation that consolidation of Europe's banking industry will accelerate, which, interestingly, is exactly the same reaction the March announcement of the banks' merger prompted.
That's because the taboo on grand-scale consolidation now appears to be broken, lending an edge to the already fluid state of the German financial services industry. The next deal could come at any time from any quarter, and it could be structured on a number of shifting alliances. All of this will help make financial shares not only of interest to Germans, but also to other European and U.S. investors as well.
In the meantime, Deutsche has said it will bravely soldier on alone. Dresdner, on the other hand, looks particularly vulnerable. The first head to roll was that of Dresdner Chairman Bernhard Walter, who resigned Thursday. He still blames the failed merger on Deutsche's intransigence regarding the integration of the two banks' investment banking operations. Clearly his departure doesn't help Dresdner's odds of remaining independent.
Only hours after the merger was put to rest, talk percolated that a number of foreign financial institutions, including U.S. heavyweights
, were preparing bids for the weakened Dresdner. Already, reports have surfaced that German insurer
, which holds 21.7% of Dresdner Bank, would not shy away from even hostile bids for its share of the bank.
"Pending proof to the contrary, Dresdner Bank now has to be regarded as in play, and all bid rumors with even a shred of business logic have to be taken seriously," says Daniel Davies of
Fleming Aros Research
in London. "Any future merger for Dresdner would not be at a significant premium to the current price, and there is certainly nobody out there who is prepared to pay as much for Dresdner as Deutsche was." Davies rates Dresdner a hold and Deutsche a buy.
last week, Allianz is the big loser in the bank debacle at this point, but it may be ready to make another move. The coming week could see Allianz attempt either to force Dresdner into another union, perhaps with
, or possibly to solidify its intention to pursue Deutsche Bank's unprofitable retail banking operations.
On Friday, Allianz rose 9.60 euros, or 2.4%, to 407.40; Deutsche Bank was finally able to stop its bloodletting, ending up 0.60 euros, or 0.8%, at 78.10. Dresdner, however, continued to slide, falling 2.28 euros, or 4.8%, to 45.85.
Coming close on the heels of the cross-border linkup between the British-Hong Kong bank
Credit Commercial de France
, Dresdner's decision not to join up with Deutsche might mean another big European merger isn't too far off. That is, if American institutions such as Citigroup and Chase turn down the challenge of taking over Germany's third-largest bank.