(Bloomberg) -- Sixteen years after its last major deal, Deutsche Bank AG is finally ready to move on.
Since then-Chief Executive Officer Joe Ackermann initiated the takeover of retail lender Postbank, three days before the failure of Lehman Brothers Holdings Inc., Deutsche Bank has flip-flopped on what to do with the business. Failed IT projects and lawsuits brought by Postbank shareholders further complicated matters.
Now CEO Christian Sewing is ready to close that chapter after agreeing to pay out about €350 million to a group of former Postbank investors to settle claims that they were underpaid. While a smaller group of holdouts hasn’t settled yet, a court ruling scheduled for October could end most of the remaining litigation.
Earlier this year, Deutsche Bank managed to clear the backlog from a botched Postbank data migration project that cut off thousands of clients from essential bankings services last year. The error forced Sewing into a public apology and cost him a chunk of his bonus. No material new issues have cropped up since March, a spokesman said.
The investor litigation and the IT migration were the two biggest legacy headaches remaining from the Postbank deal, which was conceived as a way to balance Deutsche Bank’s reliance on trading. Ackermann said at the time the combination would make Germany’s largest lender “untouchable.”
Watch the 2008 press conference: Ackermann Says Deutsche Bank ‘Untouchable’ With Postbank
That rationale was upended when the financial crisis put an end to the golden era of investment banking, while record-low interest rates hit income from lending. A plan to use Postbank’s massive retail deposits as a cheap source of funding for the trading operations foundered on regulatory objections.
Deutsche Bank subsequently decided to sell Postbank, aborting a large-scale project to merge its IT systems. The sale was canceled when it failed to find a buyer, forcing it to initiate the next revamp.
Costs related to the IT issue diverted resources from other projects. Litigation provisions of €1.3 billion, meanwhile, prompted the lender last quarter to shelve a pledge to buy back more shares this year. Deutsche Bank is now reviewing that decision, as the Postbank settlement allows it to release a chunk of its reserves.
The ill-fated deal has also negatively influenced how Deutsche Bank has looked at future acquisitions, Sewing has indicated. The current CEO is a Deutsche Bank lifer who was a crucial driver of the lender’s Postbank strategy as head of the retail and wealth management unit between 2015 and 2019.
--With assistance from Levin Stamm.
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