The bank has confirmed it is close to reaching a deal to buy Bankers Trust, the eighth largest bank in the US, for $10bn (£6bn) in cash.

The deal would create the world's largest banking group in terms of assets, with $840bn, making it bigger than the recently merged Citigroup and the Swiss group UBS.

It would also be the largest takeover by a foreign financial institution in the US.

Detusche Bank wants more clout on Wall Street

Bankers Trust, which specialises in investment banking, has been vulnerable to a takeover since reporting a loss of $488m in the third quarter due to the turbulence on world markets.

It also revealed an $875m exposure to hedge funds.

Bankers Trust was one of the first banks to move into derivatives trading, creating complex financial products which can be very profitable but are highly speculative.

It now lacks the capital base to compete with US rivals like Goldman Sachs, Citigroup, and JP Morgan.

Deutsche Bank has been trying to acquire a US investment bank for some time to strengthen its global ambitions.

The combined group would be a world leader in asset management, global custody, leveraged finance, and in the issue of corporate bonds.

Weekend talks

The board of Bankers Trust met Deutsche Bank chairman Rolf Breuer on Sunday night at a New York law firm to discuss the deal.

Both boards, including the Deutsche Bank supervisory board will meet next Sunday to approve the merger.

Reports suggest that the head of Bankers Trust, Frank Newman, will co-manage the new global corporate and institutional banking wing.

Job losses

The merger is likely to lead to job losses both in New York and London.

Deutsche Bank already owns Morgan Grenfell, a London investment bank, while Bankers Trust acquired Natwest's stockbroking arm, now called BT Alex Brown, with 2,500 employees.

Deutsche Bank employs 2,000 in New York in its existing operations.

Shares surge

Shares in both groups surged on the merger speculation.

Deutsche Bank shares rose by nearly DM4, or 5.7%, to DM68.69 in Frankfurt.

Bankers Trust's shares rose by $8.86 or 11% on Monday after an initial gain of 7.3% or $5.25 on Friday, to reach $86.625 by 1020 local time (1520GMT).

The $10bn offer would value Bankers Trust at $93 a share.

Any takeover would need the approval of the US Federal Reserve Bank as well as European competition authorities. The two banks plan to brief the relevant authorities this week.

There has already been a wave of mergers among US financial institutions this year. Bank of America and Nationsbank merged to form the largest retail bank, while Citicorp and Travellers Insurance merged to create the largest financial institution before today's news.

In Europe, the two largest Swiss banks UBS and SBC merged to create the largest bank in Europe.