Relief For DrKB Staff As Dresdner Derails Deutsche Banking Merger

FRANKFURT--Staff at Dresdner Kleinwort Benson breathed a sigh of relief last week as the Deutsche/Dresdner merger was called off at the 11th hour.

Bottles of champagne were broken open on DrKB’s forex trading floor moments after the announcement hit the screens. "The news and the slack caused by the stock market shutdown in London put us all into a party mood," said one forex trader.

"We later spilled on to the streets and I’m sure there were a few sore heads the next day. Up to then many of us had lived in a manic state--wildly optimistic one moment, wildly depressed the next."

But the euphoria was not one sided. Insiders report that a cheer went up in Deutsche Bank’s trading rooms in Frankfurt and London as the news of the split emerged.

Though the majority of the job cuts would have come from Dresdner Kleinwort Benson--the investment banking arm of Dresdner was to have lost up to 95 per cent of its staff--Deutsche traders knew that in every merger some of the best survive and some of the weakest fall by the wayside.

The rupture between the two banks looks permanent. But the questionmarks over the future of Dresdner Kleinwort Benson remain.

Two possible problem areas have emerged--continued job losses and its status as a potential take-over target by other predator banks.

"The new catchphrase is ‘death by a thousand resignations’ says a London recruiter. "With the CVs of Dresdner Kleinwort Benson staff widely distributed around the City already we should expect to see further defections."

DrKB has lost a stream of staff since the potential merger was announced this March.

Indeed, according to one newspaper report last Friday, a trading team of 30 people are touting themselves around the US markets in search of work.

One of the most senior departures in the treasury was TJ Lim, co-head of global markets who resigned last Tuesday.

Lim is to rejoin Merrill Lynch in a newly created position as head of international debt markets.

Lim previously worked for Merrill Lynch in 1994-95 as co-head of global foreign exchange. He left to join UBS in 1995 to head fixed income and currency derivatives, and became global head of currencies in 1997.

He joined DrKB as co-head of global markets at the time of the UBS/Swiss Bank Corporation merger in 1998.

And Dresdner’s CEO Bernhard Walter resigned last Thursday.

While Deutsche has ruled out the prospect of a hostile takeover of Dresdner, the bank is a vulnerable target for other interested parties.

Citibank, Chase Manhattan and Lehman have all been touted as potential buyers for all or part of Dresdner.

Josef Ackermann, head of Deutsche’s investment banking unit, said at the bank’s annual results press conference on Thursday there were over 10 banks who got in touch about buying DrKB.

And any mergers or takeovers would still mean trouble ahead for the London-based investment bank.

"The only hope for staff at Dresdner Kleinwort Benson is if they get taken over by a bank like Lloyds--which doesn’t do much in FX," says one analyst.

"And even then there would have to be changes in senior management and strategy because banks like Lloyds don’t have the risk appetite."