Deutsche Bank has successfully negotiated settlements with about 60 percent of the plaintiffs in a long-running legal battle over allegations that it undervalued its acquisition of Postbank. That acquisition occurred more than a decade ago.
In a recent announcement, Deutsche Bank revealed that it has finalized agreements with more than 80 claimants at a rate of 31 euros ($34.53) per share, as originally offered by the bank. This agreement is expected to positively impact Deutsche Bank’s third-quarter pre-tax profit of 430 million euros.
By the close of trading at 4.25pm in London, Deutsche Bank shares had risen 3.95%, hitting a month-long high.
The bank’s shares had already taken a hit after the announcement of its second-quarter results on July 24, which reported its first net loss in four years. This loss was mainly due to a provision of 1.3 billion euros for the ongoing litigation with Postbank.
The lawsuit arose from claims by institutional and individual investors that Deutsche Bank paid less than fair value in its step-by-step acquisition of Postbank, a major German retail bank. The two entities completed their merger in 2018.
Further settlements are expected to have further positive effects on Deutsche Bank’s overall statutory provisions.
A Deutsche Bank spokesperson welcomed the deals, noting that they significantly reduced both the costs and risks associated with the Postbank acquisition lawsuit. The spokesperson explained that these developments are beneficial to the bank’s financial statements and overall earnings.
The spokesperson also said that in light of the capital raise, the bank would reassess its distribution strategies and discuss them with regulators as part of ongoing discussions. The bank remains committed to improving its operating performance, franchise momentum and shareholder returns.
In its second-quarter financial report, Deutsche Bank announced that it would not conduct a second share buyback this year, opting instead to prioritize the accumulation of excess capital.
Analysts at JPMorgan said Thursday that the deal would likely 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 viewed the deal favorably as a step toward resolving a long-standing and contentious issue.
However, they noted that the deals are not expected to result in a second round of share buybacks in 2024. They stressed that Deutsche Bank will need to demonstrate sustained capital generation to reassure the market about its ability to handle higher outlays, especially given potential challenges such as the European Central Bank’s review of leveraged finance.
The Postbank litigation has been a significant burden for 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 sent the case back to the Higher Regional Court for a new ruling.
While some of the claims are still pending, Jan Bayer, senior partner at the law firm Bayer Krauss Hueber, which represents about 50 mostly institutional plaintiffs, said his clients have rejected the deal. Last week, Bayer described an offer of 36.5 euros per Postbank share as a “last dip.”
