Jump to
Deutsche Bank warned on Friday that a portion of its projected pre-tax profit for 2024 might be eroded due to an ongoing shareholder lawsuit related to its 2010 acquisition of Postbank.
The bank disclosed it may set aside up to €1.3bn in provisions after a Cologne court said it was set to lose elements of a complex lawsuit concerning its compensation for Postbank shareholders. The legal battle stems from allegations by former Postbank shareholders that Deutsche Bank undervalued their shares during the acquisition process.
In 2008, Deutsche Bank acquired a 30 per cent stake in Postbank at a price of €57.25 per share. Over the subsequent years, Deutsche Bank steadily increased its stake. However, amid the height of the financial crisis, the price offered by Deutsche Bank for the remaining shares was slashed in half, causing frustration among Postbank’s minority shareholders.
The warning follows the bank’s quarterly earnings report released on Thursday, which saw its pre-tax profits increase by 10 per cent to €2bn year on year and its shares surge by over 8 per cent, reaching a seven-year high.
In a statement, the bank said: “While Deutsche Bank continues to disagree strongly with this assessment, the court’s statements will impact Deutsche Bank’s estimation of the probability of a future outflow, resulting in a legal provision in the second quarter of 2024.”
“Generally, management does not expect a significant impact on the bank’s strategic plans or financial targets,” it added.
—
The largest western banks operating in Russia paid the Kremlin more than €800mn in taxes last year, as reported by the Financial Times. Despite their commitments to reduce operations in the country following Russia’s full-scale invasion of Ukraine, the FT notes that their tax contributions represent a fourfold increase compared to pre-war levels.
According to the FT’s report, the top seven European banks by assets in Russia, including Raiffeisen Bank International, UniCredit, ING, Commerzbank, Deutsche Bank, Intesa Sanpaolo and OTP, collectively reported profits exceeding €3bn in 2023, triple the figures from 2021.
These profits, partially derived from funds they cannot withdraw from Russia, led to the increase in tax payments to the Russian government, up from €200mn in 2021.
A senior executive at a European bank with a Russian subsidiary quoted by the FT said: “We can’t do anything with Russian deposits apart from keeping them with the central bank. So as interest rates went up, so did our profits.”
The FT stated that figures from US banks are not accounted for in the €800mn total, as they do not provide comparable Russian results in the group accounts used for its analysis.
More than half of the €800mn tax payments originated from Raiffeisen Bank’s Russian operation, the FT’s analysis revealed.
Despite stating its intentions to downsize its presence in the country and reducing its loan book in the country by 56 per cent since early 2022, RBI’s profits in Russia surged to €1.8bn in 2023, accounting for half of the Austrian banking group’s total earnings.
Additionally, the FT writes that US giants Citi and JPMorgan also continue to maintain a sizable presence in the country. According to its analysis, despite closing its corporate and retail business in Russia, Citi, for example, remained one of the top taxpayers to Russia among western banks, earning $149mn in profits and paying $53mn in taxes in 2023.
Exiting Russia poses a significant challenge for western banks due to locked-up funds and the need for personal authorisation from President Vladimir Putin. Among the 45 western banks requiring presidential approval to leave, only seven, including Mercedes-Benz Bank and Intesa, have obtained such authorisation.
—
US regional lender Republic First Bancorp, which operates across Pennsylvania, New Jersey, and New York, has been closed by regulators in the first US bank failure of 2024.
The Federal Deposit Insurance Corporation announced on Friday that it had taken control of the institution, also known as Republic Bank, which held around $6bn in assets and $4bn in deposits as of January 31.
Fulton Bank, headquartered in Lancaster, Pennsylvania, has stepped in to assume the majority of Republic Bank’s deposits and acquire nearly all of its assets, according to the FDIC.
The failure of Republic Bank is expected to incur a cost of $667mn for the FDIC’s deposit insurance fund.
—
UK digital bank Monzo is reportedly finalising a new £500mn fundraise with support from technology investor Hedosophia, known for backing early-stage ventures like Airbnb and Uber.
As reported by Sky News, citing sources familiar with the matter, Monzo is set to announce this week that both Hedosophia and Singapore’s Government Investment Corporation are participating in the fundraising. GIC’s investment is rumoured to exceed £50mn, while Hedosophia is also said to be committing tens of millions of pounds.
This news follows Monzo’s recent funding round of $400mn completed in March, which propelled its valuation to $5bn. Monzo currently ranks as the seventh largest retail bank in the UK by customer numbers; it has over 9mn personal account customers.
After years of losses, Monzo expects to reach profitability this year. It is currently engaged in an international expansion strategy that, according to press reports, may serve as a prelude to an initial public offering in the years to come.
