Germany’s largest bank has to set aside billions in a lengthy legal dispute over the Postbank takeover. This has spoiled the second quarter. But there is a profit before taxes.
The takeover of Postbank more than ten years ago has had expensive consequences for Deutsche Bank. A provision worth billions in a lengthy legal dispute with former Postbank shareholders put the DAX group in the red in the second quarter. The bottom line was a loss of 143 million euros, Deutsche Bank announced in Frankfurt. It was the first quarterly loss since the beginning of 2020 for the bank, which had managed to turn things around in recent years.
A year ago, Deutsche Bank earned 763 million euros. In day-to-day business, however, things went a little better than analysts expected: without the Postbank provision, the second quarter saw a pre-tax profit of 1.7 billion euros – after 1.4 billion in the same quarter last year.
Long shadow of the Postbank takeover
The bank had already announced at the end of April that the majority takeover of Postbank in 2010 could have expensive consequences. In a legal dispute with former Postbank shareholders that has been going on for years, the Higher Regional Court (OLG) in Cologne indicated that it could rule in favor of the plaintiffs. Deutsche Bank therefore set aside 1.3 billion euros as a precaution – a burden on the way to achieving its annual targets.
The core issue is whether the compulsory compensation for minority shareholders agreed in 2010 was appropriate and whether Deutsche Bank had de facto control over the Bonn-based institution even before the public takeover offer for Postbank in 2010. If the parties do not reach an out-of-court settlement, the Cologne Higher Regional Court will rule on August 21.
Investment banking strong in the second quarter
In contrast, Deutsche Bank’s operating business performed well. Revenues – i.e. total income – grew by two percent to 7.6 billion euros. The group’s growth was particularly strong in investment banking. Revenues there rose by ten percent to 2.6 billion euros compared to the same period last year. The growth came primarily from the advisory and securities issuing business, which doubled revenues.
Before taxes, profits in the second quarter totaled 411 million euros. “This is the best result in a second quarter in 13 years,” wrote CEO Christian Sewing in a letter to employees published by the bank. “We are still on track to achieve our goals for 2025 – including the targeted distribution to our shareholders.” The figures were poorly received on the stock market: Deutsche Bank shares lost around seven percent in the morning.
Deutsche Bank stressed that the Postbank provision had no impact on the bank’s strategic plans or financial targets. It confirmed its targets for the current and coming year. “We are on track to achieve around 30 billion euros in earnings for the full year, as planned,” wrote Sewing. The bank also has its sights firmly set on the targets for the end of 2025 – in particular a return on tangible equity of more than 10 percent.
Much unrest around Postbank
By taking over Postbank, which focuses on private customers, Deutsche Bank wanted to become more independent from volatile investment banking. But Postbank has recently repeatedly made negative headlines. For example, chaos during the transfer of customer business to Deutsche Bank’s computer systems last year angered many Postbank customers. At times they were unable to access accounts and mortgage loans were delayed. This brought the financial regulator Bafin into action, which sent a special representative. The Postbank chaos also had repercussions for Deutsche Bank’s board of directors: they received fewer bonuses for the 2023 financial year.
Source: Stern
