A Cologne higher regional court ruled against Deutsche Bank on Wednesday in a protracted legal battle with shareholders, who argued that the bank underpaid for its acquisition of Postbank. The court’s decision adds to the ongoing challenges facing Deutsche Bank related to this significant transaction.
Background of the Case
The lawsuit involved 13 plaintiffs, former shareholders of Deutsche Postbank, who contended that the acquisition price of 25 euros ($27) per share, paid in 2010, was insufficient. They argued that Postbank was worth more than the amount Deutsche Bank paid, claiming they should have received 57.25 euros per share—the price of Deutsche Bank’s initial 30% stake in Postbank, which occurred just before the collapse of Lehman Brothers and the onset of the global financial crisis.
The full merger between Deutsche Bank and Postbank was finalized in 2018, but legal complications surrounding the acquisition have persisted, impacting Deutsche Bank’s financial outlook.
Financial Impact
The ongoing litigation has weighed heavily on Deutsche Bank’s performance, particularly as recently as the second quarter, when the lender reported a loss of 143 million euros after setting aside 1.3 billion euros related to the Postbank lawsuit. In August, Deutsche Bank managed to reach settlements with nearly 60% of the plaintiffs involved in the case.
On the same day as the court ruling, Deutsche Bank reported a release of 440 million euros in litigation provisions for the third quarter. This release contributed to a better-than-expected net profit attributable to shareholders of 1.46 billion euros ($1.58 billion) during the period.
Next Steps for Deutsche Bank
Following the court’s ruling, Deutsche Bank announced it would assess the judgment, noting that it had already set aside provisions for all outstanding claims from the plaintiffs, including any accrued interest. A spokesperson for the bank mentioned that the court did not permit an appeal to the German Federal Court. However, Deutsche Bank is considering filing a non-admission complaint (a motion for leave to appeal) once it receives the written reasoning for the court’s decision.
In response to the news, shares of Deutsche Bank fell 2.3% as of 10:58 a.m. London time.
Conclusion
This ruling marks another chapter in the ongoing legal struggles for Deutsche Bank concerning its acquisition of Postbank. The bank will need to navigate this ruling while managing its financial performance and shareholder expectations in the coming months.