Lloyds TSB in negotiations to buy Dresdner Bank

Lloyds TSB is in discussions with insurance company Allianz to buy its Dresdner Bank unit.

Lloyds is understood to have commenced work on a potential deal and has submitted an unbinding offer for the unit.

Lloyds has come out of the global credit crisis relative unscathed and has a market value of £19 billion.

When it emerged that Northern Rock had problems, Lloyds came close to a deal to purchase the crisis-torn bank last year.

However, the deal ended after Mervyn King, the Bank of England‘s governor, blocked it on worries that it would have required support from the government.

One option for Lloyds is to give its Scottish Widows life-assurance business to Allianz in exchange for Dresdner’s retail operations, which are valued around £6 billion.

However, according to some of Lloyds’ investors, the bank should avoid doing a deal in the German retail market.

Lloyds’ benefit as an investment is that they have a strong balance sheet and I would like them to keep that benefit, according to Jane Coffey, head of equities at Royal London Asset Management.

Lloyds TSB declined to comment on the deal.

It is also rumoured that Spain’s Banco Santander SA is considering a bid for Dresdner Bank. Furthermore, there is speculation that Commerzbank AG. is in discussions with Allianz to acquire Dresdner and subsequently wants to acquire Deutsche Postbank AG.

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