America's largest company has agreed to pay $2.9bn (�1.86bn) for one of the US subsidiaries of Germany's largest bank.

General Electric will incorporate Deutsche Bank's US leasing unit, Deutsche Financial Services (DFS), into its own GE Capital Commercial Finance Unit.

GE will buy DFS because it will boost its finance arm by providing inventory finance to several major US manufacturers.

Deutsche Bank sold the unit to drive its cost cutting efforts further.

"This is another important step in our strategy of focusing on core businesses," Deutsche Bank chief executive Josef Ackermann said.

Cutting costs

Under the deal, Deutsche Bank will receive $450m in cash.

In addition, GE will pay DFS' $2.45bn debts.

The sale should help the bank reduce its operating costs by 2bn euros (�1.25bn; $1.96bn) by 2003.

Other measures include 14,500 job cuts which have already been announced.

Expected deal

GE's acquisition is just the latest of many where the seller is cash starved, and where the subsidiary which is being sold fits neatly into GE's umbrella of companies.

"The deal has been in the market for weeks and is no surprise," said Alexander Plenk, an analyst at Bankgesellschaft Berlin.