May 21 (Bloomberg) -- Allianz SE is in talks that might lead to a sale or merger of its Dresdner Bank unit and sees the ``first apparently realistic possibility of a significant consolidation'' in Germany's banking market.

``Discussions are currently taking place, although these have not yet reached the stage where I should like to report on them today,'' Allianz Chief Executive Officer Michael Diekmann told shareholders at the annual meeting in Munich. He declined to be more specific about Allianz's talks ``in order not to compromise our negotiating position.''

Allianz, Europe's biggest insurer, is considering ``all options'' for Dresdner Bank, Chief Financial Officer Helmut Perlet said earlier this month. The insurer, which bought the bank for 23.5 billion euros ($36.8 billion) in 2001 in its biggest-ever acquisition, aims to put Dresdner's private and corporate client units in a separate unit by the end of August to help it play an ``active'' role as German banks consolidate.

Allianz's banking business has ``not yet reached the quality of our other business segments,'' Diekmann told about 4,000 shareholders gathered today. ``We are working on this challenge.''

Allianz fell 3.7 percent to 124.37 euros today in Frankfurt trading, valuing the company at 56.3 billion euros. The shares are down 16 percent this year, lagging behind the Bloomberg Europe 500 Insurance Index, which fell 14 percent.

The possible sale of Deutsche Postbank AG, Germany's biggest retail lender, and Citigroup Inc.'s German consumer-banking unit has raised speculation that a wave of takeovers could involve many of the country's biggest banks. Postbank may be put up for sale by majority owner Deutsche Post AG, and New York-based Citigroup said May 16 it is exploring ``a variety of options'' for Dusseldorf- based Citibank Privatkunden AG & Co. as part of a plan to shed $400 billion of assets.

Buyback Approval

Deutsche Bank AG, which ended talks about a combination with Dresdner in 2000 because the banks couldn't agree on how to combine their securities units, and Commerzbank AG have said they would be interested in Postbank as well as in Citibank.

Allianz got approval today to repurchase as much as 10 percent of its shares. Shareholders rejected a comparable buyback at last year's annual meeting. Allianz management board member Paul Achleitner said the insurer has no plans at the moment for a share buyback.

To contact the reporter on this story: Oliver Suess in Munich at osuess@bloomberg.net

Last Updated: May 21, 2008 12:28 EDT