Deutsche bank: Significant provision on the Postbank file

(CercleFinance.com) – German banking giant Deutsche Bank announced on Friday that it would have to make a heavy provision in its accounts following a favorable court decision.

In an opinion delivered on Friday, the Cologne High Court ruled in favor of certain Postbank shareholders, who believed that an improved price should have been paid to them in 2010 at the time of the takeover offer submitted by Deutsche Bank.

In a press release, Deutsche Bank explains that this decision increases the probability of future financial compensation, which will lead it to constitute a provision of around 1.3 billion euros in its second quarter results.

In terms of the minimum and mandatory capital ratio known as ‘CET1’ (Common Equity Tier 1), the group estimates the impact of this reserve at around 20 basis points, or a level of 13.25%.

Deutsche nevertheless warns that it is currently impossible for it to determine the definitive financial implications of the matter.

‘It is a shame that the recent improvement in its operational performance and the existence of a favorable environment are obscured by a legal dispute dating back several years,’ RBC analysts lamented this morning.

More concretely, the Barclays and UBS teams are wondering if these unexpected expenses are not likely to slow down Deutsche Bank’s plans in terms of distributing capital to its shareholders.

The German financial group itself admitted this weekend that it was still too early to know whether its second tranche of share buybacks planned for this year would indeed be implemented.

‘For our part, we no longer expect this second operation to be completed and are simply counting on the finalization of the envelope of 675 million euros currently in progress,’ warns UBS.

Following these announcements, Deutsche Bank shares fell by almost 5% on Monday morning on the Frankfurt Stock Exchange, marking by far the biggest drop in the DAX index.

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