Commerzbank to shrink Dresdner Kleinwort

By Steve Slater and Olesya Dmitracova

LONDON (Reuters) - One of the most famous names in merchant banking is set to go along with up to 2,000 investment banking jobs as Germany's Commerzbank retrenches Dresdner Kleinwort as part of its takeover of Dresdner Bank.

Commerzbank has already run down its own investment bank arm and will shrink Dresdner Kleinwort -- one of London's most famous banking names since its formation over 220 years ago -- and focus the combined business on servicing German companies, analysts said.

"Commerzbank doesn't seem to have the appetite for a broader investment banking base," said David Williams, bank analyst at Fox-Pitt Kelton.

"They used to have Commerzbank Securities, they closed much of the overseas operation for that. One presumes they are going to do the same thing with Dresdner Kleinwort -- it would represent a substantial scaling back of the operation."

Commerzbank is buying Dresdner from German insurer Allianz for 9.8 billion euros (8 billion pounds).

The attraction is mainly Dresdner's retail branch network, leaving Dresdner Kleinwort particularly vulnerable at a time the investment banking industry faces slumping revenues and is already taking a knife to jobs.

Commerzbank is expected to stick with a strategy for its investment bank it began four years, when it scaled back ambitions and cut its risk exposure by quitting proprietary trading.

The new business -- Commerzbank Corporates and Markets (CBCM) -- pulled back from taking on big Wall Street rivals. Instead, it positioned itself as a niche player offering German retail clients equity derivatives products and providing foreign exchange, debt finance and other services to German companies, including the key Mittelstand.