Deutsche Bank is facing a potential setback as it warned investors that up to a fifth of its expected pre-tax profit in 2024 could be wiped out due to a long-running shareholder lawsuit over its 2010 takeover of Postbank. The bank disclosed that it may need to set aside up to €1.3bn to cover potential losses in the lawsuit.
This news comes on the heels of Deutsche Bank reporting its highest quarterly profit in 11 years, which led to an 8% increase in its shares. However, the looming legal battle with former Postbank shareholders threatens to dent the bank’s profitability.
The lawsuit revolves around allegations that Deutsche Bank underpaid for Postbank shares during the takeover, with shareholders claiming that the bank gained de facto control before making a mandatory takeover offer. Despite previous court rulings in favor of Deutsche Bank, the Federal Court of Justice nullified them, leading to a new trial in 2017.
Deutsche Bank is now bracing for a potential defeat in the final round of the lawsuit, as the Cologne court indicated that it may find elements of the shareholders’ claims valid. The bank maintains that it strongly disagrees with the plaintiffs’ view and is still analyzing the legal and financial implications of the court’s opinion.
While the provision for the lawsuit may impact Deutsche Bank’s financial targets for this year, management does not expect a significant impact on its long-term strategic plans. However, the provision could affect the bank’s promise to increase dividends and share buybacks by an additional €3bn by 2025. Investors will be closely watching how Deutsche Bank navigates this legal challenge and its implications for future profitability.