The credit crisis gave no respite to European financiers yesterday as Allianz, the German insurer, moved to sell its loss-making Dresdner Bank and profits tumbled at Crédit Agricole, France’s biggest bank.

In Germany, Commerzbank disclosed plans for a special meeting of its supervisory board this weekend to finalise a probable bid to buy Dresdner Bank from Allianz.

The merger of Germany’s second-biggest and third-biggest banks in a deal estimated at €9 billion is designed to create a rival to the dominant Deutsche Bank.

The supervisory boards of Allianz and Dresdner are to meet on Sunday amid reports that China Development Bank, once tipped as a possible buyer, had pulled out of the race after diplomatic friction between Beijing and Berlin. With Germany looking to put hurdles in the way of foreign investment and China angered by Germany’s stance on Tibet, Beijing is reported to have vetoed the offer, leaving the way clear for Commerzbank.

Allianz bought Dresdner Bank in 2001 amid hopes of selling across-the-board financial services to its customers. Instead, the insurer found itself dragged into the sub-prime crisis, with Dresdner reporting a second-quarter operating loss of about €566 million after writing down €286 million in its portfolio of asset-backed securities.

Allianz said that it had put on hold a plan to split up Dresdner’s investment and retail banking arms with a view to selling them separately. The suspension suggests that Commerzbank may bid for both divisions, although sources close to the deal said that the bank had yet to make a final decision.

In the latest sign of damage from its foray into investment banking, Crédit Agricole emerged with posttax, second-quarter profits of €76 million (£61 million) – a 94 per cent fall compared with last year - after writing down €1.3 billion. First-half profits were €968 million, down 75.5 per cent. The move drove Calyon, Agricole’s investment banking arm, to a second-quarter loss of €855 million and a first-half loss of €1.65 billion.

Agricole wrote down €1.2 billion in the first quarter and €4.2 billion last year, causing the French regional banks holding 54 per cent of its capital to demand a move away from glitzy international finance and back to traditional retail banking activities in rural France.

However, the biggest quarterly markdown in French banking was greeted with relief yesterday by investors who had feared even worse results. Crédit Agricole shares closed up by almost 9 per cent at €14.39.

Analysts said that Agricole may be on the verge of a recovery after ousting Marc Litzler, Calyon’s chief executive, bringing the division under central control and reducing investment activities. Michael Sellam, a fund manager for Iris Finance, said: “People are saying that we’re not far from the end of the tunnel for Agricole.”

To try to shore up its finances, the bank completed a €5.9 billion capital raising this summer and has promised asset sales worth €5 billion.

Natixis, the second-tier French investment bank, was also caught up in the turmoil, reporting a first-half, posttax loss of €948 million after writedowns of €1.5 billion. Dominique Ferrero, its chief executive, said: “This is the most significant, most violent and most long-lasting of all the financial crises we’ve had since the War.”

To counter the storm, Natixis is expected to announce a €3.7 billion rights issue soon, with analysts forecasting a discount of up to 40 per cent to attract wary investors.

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