In the proposed three-way arrangement, Dresdner Bank would be transferred to Commerzbank as an asset. The resulting institution would then acquire Postbank, which will be up for sale in the next few months, according to the report.

The deal hasn't been inked, however. Discussions are still underway and negotiations have not yet begun, according to the daily Frankfurter Allgemeine Zeitung, which did not identify its sources.

Allianz acquired Dresdner Bank seven years ago in response to government plans to promote private pension plans. Speculations about the future of the Frankfurt-based bank have arisen since Dresdner announced earlier this week that it was planning to split its investment division from its customer banking department.

According to other news reports, Spain's giant Banco Santander has expressed interest in acquiring Dresdner and Allianz is also holding talks with Beijing's state-owned China Investment Corporation over the sale of their banking offshoot.

If the three-way merger pans out, it could take months to see through. As the largest shareholder in the Deutsche Post, the owner of Postbank, the German government would have a decisive say in the deal.

The resulting bank would, with 26 million customers, become the country's largest.