Deutsche Bank recently announced that it has reached settlements with nearly 60% of the plaintiffs involved in a case regarding the underpayment for its acquisition of Postbank over a decade ago. The agreements with over 80 plaintiffs involve a settlement amount of 31 euros per share, as proposed by the bank. This move is expected to boost Deutsche Bank’s anticipated third-quarter pretax profit by 430 million euros.
Following these settlement agreements, Deutsche Bank’s shares saw a surge of 3.95% in London, marking their highest level in a month. This positive movement in the stock price comes after a significant drop that followed the bank’s second-quarter results which reported a net loss, largely due to a provision made for the Postbank cases.
Deutsche Bank stated that settlements with additional plaintiffs could have further positive implications on the total provisions taken for the litigation. A bank spokesperson expressed the company’s satisfaction with the settlements, emphasizing the reduction in cost and risk associated with the Postbank takeover litigation. These developments are expected to have a positive impact on the bank’s earnings and capital position.
Analysts at JPMorgan have commented on the settlement, estimating that it would add approximately 10 basis points to Deutsche Bank’s common equity tier 1 capital. They view the settlement as a positive step towards resolving a longstanding litigation matter. However, they cautioned that ongoing capital generation would be necessary for the market to be comfortable with increased payouts in the future.
The Postbank claims have been looming over Deutsche Bank for more than a decade. While the Higher Regional Court of Cologne dismissed all claims in 2020, the ruling was overturned by Germany’s Federal Court of Justice in 2022. This decision has resulted in some claims still remaining unresolved. Jan Bayer, a senior partner at a law firm representing several institutional claimants, mentioned that his clients had rejected the settlement offer.
Deutsche Bank’s settlements in the long-running Postbank acquisition case signify a significant step towards resolving the legal issues surrounding the acquisition. The positive implications on provisions and capital position are expected to have a favorable impact on the bank’s financial performance. However, the remaining claims and the need for ongoing capital generation are factors that will continue to shape Deutsche Bank’s future actions in this matter.
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