Commerzbank rules out offer for City investment house DKB

Germany's Commerzbank yesterday ruled out bidding for Dresdner Kleinwort Benson, the City investment bank, but said that its independence was no longer sacrosanct after the merger of rivals Deutsche and Dresdner earlier this month.

Martin Kohlhaussen, the chief executive, said recent rumours that the bank faced a hostile bid from either HSBC or ABN Amro of Holland were false. He said there was "no reason, cause, talks, suspicions" of a hostile bid.

However, he admitted that the bank, Germany's fifth-largest, is having to rethink its strategy in the light of the Deutsche-Dresdner merger."We do not want to push our independence too much. It is not size and tradition which determines success, but rather flexibility and the concentration of resources on selected strategic objectives."

He said the bank's preferred to pursue co-operation deals with other European banks. Commerzbank has ties with France's Crédit Lyonnais, Generali, the Italian insurer, and it helped BSCH fund Royal Bank of Scotland's bid for NatWest.

Analysts have been sceptical about talk of a bid for Commerzbank. The bank has a limited share of the German retail market, and its main attraction is a highly successful online brokerage, Comdirect, which it intends to float off with a price tag of 1bn euros later this year.

The market has also been sceptical of Commerzbank's plans for its investment banking operations. It has poured large amounts of money into head hunting City staff, but has failed to make significant inroads into the UK primary or advisory market.

The scepticism was borne out, at least partly, by figures yesterday that showed profits sharply down in the first two months of the financial year. The bank's shares fell sharply in Frankfurt after it also dropped its target for reducing costs. Pre-tax profits fell 7 per cent to 327m euros in the first two months.