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 pretax profit by 430 million euros, it said.
Deutsche Bank shares were up 3.95% at 4:25 p.m. in London, around their highest level for a month.
The stock 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 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 multistage acquisition of Postbank, a German retail bank with millions of clients. The institutions merged in 2018.
Settlement agreements with additional plaintiffs could result in "further positive implications on the total provisions taken for the litigation," the bank said.
"We are pleased with the settlements we announced today, which substantially reduce the cost and risk of the Postbank takeover litigation and have a positive impact on our earnings and capital position," a Deutsche Bank spokesperson said.
"Against the backdrop of this improvement to our capital plan, we will review our distribution plans and discuss these with our regulators as part of our ongoing dialogue. As before, we will continue to focus on delivering franchise momentum, operating performance and rewarding shareholders."
In its second-quarter results, the firm had said it would not conduct a second share buyback this year in order to focus on building excess capital.
Analysts at JPMorgan 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 in 2024.
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," JPMorgan said.
The Postbank 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."
