Allianz shelves plans to float off Dresdner Kleinwort Wasserstein

Plans to float the investment bank Dresdner Kleinwort Wasserstein have been shelved by its new parent, the German financial services group Allianz, following concerns over the cost of the project.

Allianz announced plans to float DKW within three years when it unveiled a merger with Germany's Dresdner Bank in April. The U-turn comes just a week after the formal completion of the tie-up.

Investment banking sources said Allianz's change of heart was prompted by worries over the amount of capital that would have needed to be injected into DKW to establish it as a separate legal entity.

A float was likely to have prevented a staff exodus by providing employees with the prospect of equity, although worries over staff loyalty will have receded following an acceleration in the investment banking lay-offs this year.

Allianz declined to comment on its proposal to float DKW yesterday. However, it revealed plans to merge DKW with Dresdner's corporate banking business in a bid to generate corporate finance and advisory work from its corporate clients.

The validity of that business model has already been demonstrated by Deutsche Bank and Citigroup, and analysts have speculated that HSBC and Merrill Lynch, the Wall Street investment bank, might merge for the same reason. Leonhard Fischer, head of investment banking at Dresdner, will oversee the new unit.

Many investment banking analysts had said DKW was more likely to be bought by a rival, such as ABN Amro or Barclays, before being floated.