(Bloomberg) -- Deutsche Bank AG is putting aside as much as €1.3 billion ($1.4 billion) in legal provisions, warning this will hit profits.

The bank will book the potential payment in the current quarter, it said in a statement late Friday. That will impact “second quarter and full-year profitability,” it said, while adding that the ultimate amount of the provisions is not clear yet.

The decision follows a hearing in which the Higher Regional Court of Cologne indicated that it may partially side with claimants in a lawsuit against Frankfurt-based Deutsche Bank filed by shareholders of Postbank AG. The hearing changed the lender’s view on how likely it is that it will end up having to make a payment. 

The setback comes as Chief Executive Officer Christian Sewing seeks to boost profitability and step up payouts to investors. The maximum provision of €1.3 billion is equal to almost 30% of the net income that analysts predict for Deutsche Bank this year.

The lawsuit — one of Deutsche Bank’s longest-running legal issues — alleges that the lender was required to offer a higher price to shareholders in rival Postbank when it made a successful takeover bid in 2010. At the time, Deutsche Bank offered €25 euros per Postbank share, but claimants say it should have used the price the stock was trading at when it first bought into the competitor in 2008, which was €57.25. 

Deutsche Bank “continues to disagree strongly with this assessment,” it said in the statement. 

The announcement came after Deutsche Bank’s shares had risen to the highest level in more than six years earlier in the day. It reported positive first-quarter results on Thursday and it is also benefiting from a sanguine investor view on the European banking industry generally.

Sewing has vowed to exceed a previous target to return €8 billion to investors over several years. While Deutsche Bank stopped short of announcing a new buyback on Thursday, it said the good first-quarter results allow it to start talks about the program with regulators. 

Given the complexity of the Postbank case, Deutsche Bank “will continue its analysis of the legal arguments and the potential financial statement impact,” it said. The bank “does not expect a significant impact” on its strategy and financial targets.

A decision to set aside the full amount of €1.3 billion would lower Deutsche Bank’s Common Equity Tier 1 ratio by about 20 basis points, it said. That ratio, which is a closely watched regulatory metric of capital strength, was 13.4% at the end of the first quarter.

--With assistance from Christoph Rauwald and John Deane.

(Updates with details and context throughout.)

©2024 Bloomberg L.P.