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Deutsche Bank EUR1.3bn Provision: Hit To Equity, Not Spreads

FINANCIALS

Deutsche Bank (Baa1/BBB/A-) hit by ruling on Postbank takeover. Equivalent to around two quarters of the equity buyback so likely this is slowed/paused. Likely not a material issue for spreads, we feel.


  • Deutsche lost an element of a case in court on Friday, which it now sees as having the potential to give rise to claims and interest of up to EUR1.3bn. The bank will provision this amount in 2Q24 results which reduces CET by 20bp (to 13.25%).
  • Mgmt indicates it disagrees with the ruling and will continue the legal process and that it “does not expect a significant impact on the bank's strategic plans or financial targets”. The equity is lower today but spreads are streaming marginally tighter.
  • Deutsche’s equity buyback (EUR675m in 2Q24 was indicated in results on 25-Apr) may be slowed in the near-term but, considering the entire provision can be offset by two quarters of delay to that buyback, this doesn’t appear a spread-material event to us.
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