Allianz has moved closer to selling Dresdner Kleinwort, its underperforming investment banking unit, after revealing that it plans to divide Dresdner Bank, its subsidiary, into two legal entities. The split will make it easier for the German insurer to take part in the consolidation of the country's retail banking sector.

A spokesman said that the move would create “two fully functioning banks under the Dresdner Bank umbrella”, giving Allianz “the necessary flexibility in order to play an active role in the ongoing consolidation of the banking market”.

There has been increasing speculation that Allianz would sell its investment banking operations or merge them with rivals, such as Deutsche Postbank. Analysts believe that keeping the division will constrain the group's ability to take part in retail banking consolidation.

Dresdner Bank's private client and corporate business has performed well, but the investment bank unit has been beset by problems in the wake of the squeeze in credit markets. Dresdner Bank made a €1.28 billion (£990 million) writedown last month on the asset-backed securities trading book at Dresdner Kleinwort.

Ralf Dibbern, an analyst with M.M. Warburg, said that yesterday's announcement was unexpected, but he welcomed the move. “It is the first step in order to get rid of Dresdner's investment bank,” he said.

Michael Diekmann, the chief executive of Allianz, said last month that there was “no reason to speculate” about Dresdner Kleinwort's future as he announced plans to cut 450 jobs at the division. Dresdner Kleinwort has 6,000 employees, of which 2,500 are based in London. The investment banking arm had not fitted in well with the insurer's retail focus and was a “burden on Allianz's share price”.

Shares in Allianz rose 0.2 per cent to €111.95.

Dresdner Kleinwort is only a brand name at present as it is still on the balance sheet of Dresdner Bank, which Allianz bought in 2001 for €23.5 billion. Separating the divisions would allow Dresdner Kleinwort to become a fully independent corporate and investment banking operation, with its own independent support functions.

The decision was made at a meeting of the supervisory board of Allianz, which is based in Munich.

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