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Deutsche Bank has successfully negotiated settlements with approximately 60 percent of claimants in a protracted legal battle concerning allegations that it undervalued its acquisition of Postbank. This acquisition occurred over ten years ago.
In a recent announcement, Deutsche Bank disclosed that it had finalized settlements with over 80 claimants at a rate of 31 euros ($34.53) per share, as initially offered by the bank. This settlement is anticipated to positively influence Deutsche Bank’s pretax profit for the third quarter by 430 million euros.
By the close of trading at 4:25 PM in London, Deutsche Bank’s shares had increased by 3.95%, reaching a peak not seen in the last month.
The bank’s shares had previously taken a hit following the announcement of its second-quarter results on July 24, which detailed its first net loss in four years. This loss was primarily due to a 1.3 billion euro provision for the ongoing Postbank litigation.
The litigation originated from claims by both institutional and individual investors, who argued that Deutsche Bank paid less than the fair value during its phased acquisition of Postbank, a leading German retail bank. The two entities completed their merger in 2018.
Further settlements are expected to have additional positive effects on the total legal provisions set aside by Deutsche Bank.
A Deutsche Bank spokesperson expressed satisfaction with the settlements, noting their significant reduction in both costs and risks associated with the Postbank acquisition litigation. The spokesperson elaborated that these developments are beneficial to the bank’s financial statements and overall earnings.
The spokesperson also mentioned that, in light of the capital enhancement, the bank would reassess its distribution strategies and discuss them with regulatory bodies as part of ongoing discussions. The bank remains committed to enhancing its operational performance, franchise momentum, and shareholder returns.
In its second-quarter financial report, Deutsche Bank announced it would not pursue a second share buyback this year, opting instead to prioritize the accumulation of excess capital.
Analysts from JPMorgan commented on Thursday that the settlement is likely to add about 10 basis points to Deutsche Bank’s Tier 1 capital, which was reported at 13.5% at the end of the second quarter. They regarded the settlement favorably as it progresses towards resolving a longstanding and contentious issue.
However, they noted that the settlements are not expected to result in a second round of share buybacks in 2024. They emphasized that Deutsche Bank would need to demonstrate sustained capital generation to reassure the market of its capability to handle increased disbursements, especially considering potential challenges like the European Central Bank’s review of leveraged finance.
The litigation surrounding Postbank has been a significant burden on Deutsche Bank for over a decade. In 2020, the Higher Regional Court of Cologne dismissed all related claims, but this decision was overturned in 2022 by the German Federal Court of Justice, which remanded the case back to the Higher Regional Court for a new ruling.
While a portion of the claims are still pending, Jan Bayer, a senior partner at law firm Bayer Krauss Hueber, representing about 50 mostly institutional plaintiffs, stated that his clients have declined the settlement. Last week, Bayer referred to an offer of 36.5 euros per Postbank share as a “last dip.”
Associated media – Associated media
