Dresdner seeks to spend war chest in the US

The restructuring of Germany's banking sector gathered pace yesterday with the announcement by Dresdner of a rights issue to finance acquisitions. Unlike domestic competitors, however, Dresdner is looking abroad with the aim of purchasing a US investment house to boost its position in the global market.

"We are establishing a war chest, but not in the sense that we are planning hostile takeovers," said Jurgen Sarrazin, Dresdner's chairman. "We are continuing to position ourselves abroad, especially in the area of investment banking."

To raise the necessary funds, the company aims to cash in on the boom in share prices in Frankfurt. Next month, it plans to issue shares in the ratio of one to 20 held, raising around DM2bn (pounds 670m).

Although Dresdner was at pains to stress yesterday that it was staying aloof from the merger-mania gripping the German banking sector, analysts pointed out that the undisclosed Wall Street acquisition might still be a prelude to a big move in the domestic market.

Before last week's merger of the Bavarian Vereinsbank and Hypobank, Dresdner had been targeting Hypo. The merged entity will knock Dresdner off its perch in second place behind Deutsche in the league table of German banks, but the consolidation may not end there.

According to analysts, the broader strategy envisages Dresdner joining forces with the Bavarian twins to establish the biggest bank in Germany. Such a link-up would provide the new Hypo-und Vereinsbank with the investment banking base it currently lacks and a network of branches throughout Germany, not just Bavaria. However, such synergies would have to be weighed up against the two groups' head-on competition in the mortgage business, which accounts for a quarter of Dresdner's balance sheets.

The picture is further complicated by cross-holdings in Allianz, Europe's largest insurance company, by all three banks. Allianz owns about 22 per cent of Dresdner and will own about 16 per cent of Hypo-und Vereinsbank. Dresdner holds about 10 per cent of Allianz.

Dresdner announced yesterday a 23 per cent rise in first-half operating profits to DM1.7bn.