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. Last Updated: 07/27/2016

Dresdner Set for $3Bln Restructure




FRANKFURT, Germany -- Dresdner Bank AG said Friday it will shed 5,000 jobs and invest 3.5 billion euros ($3.1 billion) in the next two to three years in a restructuring following the collapse of its merger with Deutsche Bank AG.


Newly appointed chief executive Bernd Fahrholz, rejecting market speculation that his bank is ripe for takeover, said Dresdner would "go forward on its own" at least for the next two to three years.


Speaking ahead of Dresdner's annual general meeting Friday, he said the bank would invest 3.5 billion euros reinforcing its corporate and investment banking business, expanding its private customer business in Europe and building up its e-business activities.


At the same time, Dresdner will cut around 300 branches from its 1,150-branch retail banking network in Germany resulting in the loss of around 2,900 jobs. A further 2,100 jobs will also go, mainly from the bank's headquarters operations.


Dresdner reported a 50.4 percent fall in net profit to 133 million euros ($118.9 million) in the first quarter due to retention payments aimed at preventing an exodus of talent from its Kleinwort Benson unit unsettled by the Deutsche debacle. Dresdner said it booked 440 million euros in "special payments to secure its competitive position."


The size of the payment surprised analysts and weighed on Dresdner's shares, which were down 2.65 percent at 44.11 euros ($39.43) in mid-morning trade. Its shares have fallen about 30 percent from the peak of 59 euros hit in March after Dresdner and Deutsche said they planned to merge. Sal. Oppenheim analyst Mehetan Sen said he was surprised at the share price fall because the restructuring was encouraging.


"The plan sounds solid and focused. I hope the stock market will realize that Fahrholz is breathing fresh life into Dresdner. He is focusing on fee-based business and investment banking. We have a price target of 60 euros and rate the stock 'accumulate,'" Sen said.


The embarrassing collapse of the link-up with Deutsche last month, after weeks of intense bickering about the future of Kleinwort Benson which prompted several key Kleinwort specialists to leave, left Dresdner looking isolated and lacking a coherent strategy in Europe's consolidating bank market.


In addition to consolidating its retail banking operations, the bank will also scale back its commercial lending activities outside Europe to free up core capital of up to 1 billion euros. It will also discontinue non-core activities outside Europe, Fahrholz said, although he declined to provide details.


In Germany the bank will concentrate on medium-sized companies, while Dresdner Kleinwort Benson will be positioned as "a leading European investment bank" with global reach, he added.