Bloomberg News

FRANKFURT - Cutting 5,000 jobs may not be enough to keep Dresdner Bank AG independent, analysts said.

Dresdner, Germany's third-largest bank, said Friday it would slash staff by 5,000, shut every fourth German branch, and take a $450 million charge after the collapse of its merger deal with Deutsche Bank AG. Though the number of job cuts is more than twice as much as expected, analysts said they doubt that chief executive Bernd Fahrholz, who took over this month, can boost earnings enough to ensure that the 127-year old bank will not be bought.

"If Dresdner wants to compete internationally, it will have to merge with a rival," said Martin Zerr, an investor who attended a meeting of Dresdner shareholders in Frankfurt Friday.

The bank, whose first-quarter profit halved as it paid $393 million in bonuses to stem staff defections at its Dresdner Kleinwort Benson investment bank, said the retail unit will bear 60% of the job losses as it shuts 300 of its1,150 branches in Germany.

Dresdner shares fell 2.5% on the news Friday, bringing this year's decline to 21%.

Mr. Fahrholz, 52, who took over after Bernhard Walter quit over the failed amalgamation with Deutsche Bank, aims to generate annual cost-savings of $447 million through the shake-up.

The retail network, which has about six million customers, had a pretax return on equity of 13% last year, compared with 27% at the investment bank, and has held back earnings for years. Banks such as Dresdner struggle to make money at home, as the market is dominated by state-owned institutions.

"The program will significantly change Dresdner Bank," Mr. Fahrholz told shareholders. "To achieve our goal, we've got to leave well-worn paths and go down new roads." Dresdner also plans to cut its lending business outside of Europe to free up $894 million to help pay for a $3.1 billion investment program through 2003.

The new CEO plans to spend $1.34 billion on the Dresdner Kleinwort Benson investment banking business, $3.4 billion on the asset management unit, and $447 million on the Internet to make Dresdner more competitive and boost the bank's return on equity by 2 percentage points, to 15% by 2003.

The Frankfurt-based bank will finance the investment by selling stakes in its industrial shareholdings, which include builder Bilfinger & Berger AG and cement maker Heidelberger Zement AG.

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