Allianz SE has agreed in principle to sell its Dresdner Bank unit to Commerzbank, a source familiar with the situation said on Friday, a deal that will fuse Germany's second- and third-biggest banks.

Commerzbank plans to take an initial 51% stake in Dresdner, then buy the remaining 49 per cent at a later stage, the source said.

Commerzbank had no comment. Allianz was not immediately available.-Reuters