Deutsche Bank has recently come to settlements with approximately 60% of the plaintiffs involved in a lengthy case regarding the German lender’s alleged underpayment for its acquisition of Postbank over a decade ago. The bank announced on Wednesday that agreements had been reached with more than 80 plaintiffs for a settlement of 31 euros per share, as proposed by Deutsche Bank. This move is expected to enable Germany’s largest lender to release the necessary funds and boost its anticipated third-quarter pretax profit by 430 million euros. The news was well-received by investors, as Deutsche Bank shares saw an increase of 3.95% in London, reaching their highest level in a month.
Following the bank’s second-quarter results released on July 24, which revealed its first net loss in four years due to a 1.3 billion euro provision for Postbank cases, Deutsche Bank had been under pressure to resolve the matter. The largest individual plaintiff, representing around a third of the claims, played a significant role in the litigation. The lawsuits against Deutsche Bank stemmed from allegations by a variety of institutional and private investors that the bank had underpaid during its acquisition of Postbank, which later merged in 2018.
Deutsche Bank expressed optimism regarding the settlements, stating that additional agreements could further reduce the provisions allocated for the litigation. A spokesperson for the bank emphasized the positive impact of the settlements on its earnings and capital position, providing an opportunity to review distribution plans in consultation with regulators. While the firm had earlier decided against a second share buyback this year to focus on building excess capital, analysts at JPMorgan viewed the settlement favorably. They estimated that it would enhance Deutsche Bank’s common equity tier 1 capital by approximately 10 basis points, a move welcomed by the market.
The resolution of the Postbank claims is a significant milestone for Deutsche Bank, as these legal proceedings have lingered for over a decade. The Higher Regional Court of Cologne dismissed all claims in the case in 2020, only for the ruling to be overturned by Germany’s Federal Court of Justice in 2022. The matter was subsequently sent back to the Higher Regional Court for further deliberation, leaving some claims unresolved. Despite the progress made with the recent settlements, some claimants, notably senior partner Jan Bayer representing mostly institutional clients, have chosen to reject the proposed settlement terms.
Deutsche Bank’s successful settlements in the Postbank acquisition case have had a positive impact on its financial outlook and capital position. The agreements reached with the majority of plaintiffs signify a step towards resolving a long-standing legal dispute that had weighed on the bank’s performance for years. While challenges remain with some claims yet to be settled, the recent developments are a testament to Deutsche Bank’s commitment to addressing legal issues and strengthening its standing in the financial industry.
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