Deutsche Bank shares rise 3% after settlement of bulk of claims in long-running Postbank suit

Deutsche Bank has reached settlements with nearly 60% of plaintiffs in a long-running case alleging the German lender underpaid for its acquisition of Postbank more than a decade ago.

In a Wednesday statement, Deutsche Bank said it had reached agreements with more than 80 plaintiffs for a settlement of 31 euros ($34.53) per share, as proposed by the bank. This will allow Germany’s largest lender to release the funds and boost Deutsche Bank’s anticipated third quarter pre-tax profit by 430 million euros, it said.

Deutsche Bank shares were 2.96% higher at 11:48 a.m. in London, around their highest level for a month.

Shares dropped sharply following the bank’s second-quarter results released July 24, in which it reported its first net loss in four years, largely due to a 1.3 billion euro ($1.45 billion) provision for Postbank cases.

That includes the largest individual plaintiff representing around a third of claims, the bank said Wednesday.

Suits were brought against Deutsche Bank by a range of institutional and private investors claiming that it underpaid in its multi-stage acquisition of Postbank, a German retail bank with millions of clients. The institutions merged in 2018.

“Should Deutsche Bank enter into settlement agreements with additional plaintiffs, this could result in further positive implications on the total provisions taken for the litigation,” Deutsche Bank said.

The claims have been hanging over the bank for more than 10 years. The Higher Regional Court of Cologne in 2020 dismissed all claims in the proceedings, but this ruling was set aside by Germany’s Federal Court of Justice in 2022 and sent back to the Higher Regional Court for a new decision.

A chunk of claims remain outstanding.

Jan Bayer, senior partner at the law firm Bayer Krauss Hueber representing around 50 predominantly institutional claimants, said his clients had rejected the settlement. Bayer last week called an offer of 36.5 euros per Postbank share a “late low ball.”

Bayer told CNBC on Thursday the acceptance had “no effects on any other claimant.”

Analysts at JP Morgan said in a Thursday note that they estimated the settlement would add around 10 basis points to Deutsche Bank’s Common Equity Tier 1 capital — a measure of bank solvency — which was 13.5% at the end of the second quarter.

“Overall, we see the settlement as a positive, moving in the direction of removing a long outstanding litigation matter,” they said.

They added that they did not assume the settlements would lead to a second tranche of share buybacks this year, which the bank previously announced in its second-quarter results that it was unlikely to make.

Deutsche Bank “would need to show ongoing capital generation for the market to get comfortable with increased payout, also given some overhangs such as the [European Central Bank]’s industry-wide leveraged finance review,” JP Morgan said.