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Deutsche Bank braces for €1.3bn hit to profits from Postbank litigation

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Deutsche Bank braces for €1.3bn hit to profits from Postbank litigation

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Deutsche Bank warned late on Friday that up to a fifth of its expected pre-tax profit in 2024 might be wiped out as it braces for defeat in parts of a long-running shareholder lawsuit over its ill-fated 2010 takeover of domestic rival Postbank.

The profit warning comes a day after Deutsche Bank reported its highest quarterly profit in 11 years, sending its shares up more than 8 per cent to their highest level in seven years.

But on Friday the lender disclosed that it would book a provision of up to €1.3bn after a court in Cologne indicated that the bank was poised to lose elements of a complex lawsuit over what it paid other shareholders in German retail lender Postbank for the stock it did not already own.

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Deutsche said it would now seek to cover this risk, but did not disclose a final figure to be set aside. It warned that “the full amount of all claims, including cumulative interest, is approximately €1.3bn”.

This compares with the €6.8bn in pre-tax profit that analysts expect in the lender’s full-year results and would knock 20 basis points from its common equity tier one — a key benchmark of balance sheet strength — pushing it down to 13.25 per cent.

The court’s assessment signals yet another Postbank-related hitch for Deutsche. In late 2023, it clashed with Germany’s financial watchdog, BaFin, over the botched integration of Postbank’s IT systems. That process resulted in many customers being locked out of their accounts, heavy disruption to internal workflows and a dramatic spike in client complaints to the regulator.

BaFin dispatched a special monitor to oversee Deutsche’s work on improving matters and publicly rebuked the lender. Deutsche said on Thursday that most of the issues had been resolved, adding that the financial hit to the bank from the disruption so far stood at more than €100mn.

Former Postbank shareholders have spent 14 years claiming that Deutsche Bank paid too low a price for their holdings. They argue that the bank had gained de facto control years before while it was in the process of buying out the remaining minority investors. It first took a stake in 2008 with an option to increase this later, which it did in three stages up to 2010

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They maintain that Deutsche ignored an obligation under German law to make a mandatory takeover offer to the remaining shareholders at a time when Postbank’s shares were trading at €57.25, against the €25 Deutsche eventually paid.

The claims were originally struck down by courts in Cologne in 2011 and 2012, but these rulings were later nullified by Germany’s Federal Court of Justice. Deutsche Bank lost a subsequent trial in 2017 but lodged an appeal, resulting in an another series of lawsuits.

The lender is now expecting to lose the final round as the Cologne court “indicated that it may find elements of these claims valid in a later ruling”.

The bank said on Friday that it “continues to disagree strongly” with the plaintiffs’ view. It added that it had not yet fully analysed the legal arguments or the financial impact of the court’s opinion but that while second-quarter and full-year profits would take a hit, management “does not expect a significant impact on the bank’s strategic plans or financial targets”.

Most of Deutsche’s published financial goals — such as lowering its cost-income ratio to 62.5 per cent and lifting its return on tangible equity to more than 10 per cent — are targeted for 2025, while the one-off effect from the Postbank issue will be felt this year.

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But the provision could have an impact on the lender’s October 2023 promise to increase dividends and share buybacks by 2025 by an additional €3bn on top of the €8bn it has already committed to returning.

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Trump claims US stockpiles mean wars can be fought ‘forever’; Kristi Noem testifies before Congress – US politics live

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Trump claims US stockpiles mean wars can be fought ‘forever’; Kristi Noem testifies before Congress – US politics live

Trump says US stockpiles mean “wars can be fought ‘forever’”

In a late night post on Truth Social, Donald Trump said that the US munitions stockpiles “at the medium and upper medium grade, never been higher or better”.

He added that the US has a “virtually unlimited supply of these weapons”, meaning that “wars can be fought ‘forever’”.

This comes after Trump said that the US-Israel war on Iran could go beyond the four-five weeks that the administration initially predicted. The president also did not rule out the possibility of US boots on the ground in Iran during an interview with the New York Post on Monday.

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“I rebuilt the military in my first term, and continue to do so. The United States is stocked, and ready to WIN, BIG!!!,” he wrote.

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Key events

During his opening remarks, Senate judicicary committee chairman, Chuck Grassley, blamed Democrats for the ongoing shutdown Department of Homeland Security (DHS) but highlighted four agencies: the Secret Service, Federal Emergency Management Agency (FEMA), the Transportation Security Administration (TSA), and the Coast Guard.

Democrats are demanding tighter guardrails for federal immigration enforcement, but a sweeping tax bill signed into law last year conferred $75bn for Immigration and Customs Enforcement (ICE), which means the agency is still functional amid the wider department shuttering.

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Supreme Court blocks redrawing of New York congressional map, dealing a win for GOP

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Supreme Court blocks redrawing of New York congressional map, dealing a win for GOP

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Win McNamee/Getty Images

The Supreme Court on Monday intervened in New York’s redistricting process, blocking a lower court decision that would likely have flipped a Republican congressional district into a Democratic district.    
  
At issue is the midterm redrawing of New York’s 11th congressional district, including Staten Island and a small part of Brooklyn. The district is currently held by a Republican, but on Jan. 21, a state Supreme Court judge ruled that the current district dilutes the power of Black and Latino voters in violation of the state constitution.  
  
GOP Rep. Nicole Malliotakis, who represents the district, and the Republican co-chair of the state Board of Elections promptly appealed to the U.S. Supreme Court, asking the justices to block the redrawing as an unconstitutional “racial gerrymander.” New York’s congressional election cycle was set to officially begin Feb. 24, the opening day for candidates to seek placement on the ballot.  
  
As in this year’s prior mid-decade redistricting fights — in Texas and California — the Trump administration backed the Republicans.   
 
Voters and the State of New York contended it’s too soon for the Supreme Court to wade into this dispute. New York’s highest state court has not issued a final judgment, so the voters asserted that if the Supreme Court grants relief now “future stay applicants will see little purpose in waiting for state court rulings before coming to this Court” and “be rewarded for such gamesmanship.” The state argues this is an issue for “New York courts, not federal courts” to resolve, and there is sufficient time for the dispute to be resolved on the merits. 
  
The court majority explained the decision to intervene in 101 words, which the three dissenting liberal justices  summarized as “Rules for thee, but not for me.” 
 
The unsigned majority order does not explain the Court’s rationale. It says only how long the stay will last, until the case moves through the New York State appeals courts. If, however, the losing party petitions and the court agrees to hear the challenge, the stay extends until the final opinion is announced. 
 
Dissenting from the decision were Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson. Writing for the three, Sotomayor  said that  if nonfinal decisions of a state trial court can be brought to highest court, “then every decision from any court is now fair game.” More immediately, she noted, “By granting these applications, the Court thrusts itself into the middle of every election-law dispute around the country, even as many States redraw their congressional maps ahead of the 2026 election.” 

Monday’s Supreme Court action deviates from the court’s hands-off pattern in these mid-term redistricting fights this year. In two previous cases — from Texas and California — the court refused to intervene, allowing newly drawn maps to stay in effect.  
  
Requests for Supreme Court intervention on redistricting issues has been a recurring theme this term, a trend that is likely to grow.  Earlier last month  the high court allowed California to use a voter-approved, Democratic-friendly map.  California’s redistricting came in response to a GOP-friendly redistricting plan in Texas that the Supreme Court also permitted to move forward. These redistricting efforts are expected to offset one another.     
   
But the high court itself has yet to rule on a challenge to Louisiana’s voting map, which was drawn by the state legislature after the decennial census in order to create a second majority-Black district.  Since the drawing of that second majority-black district, the state has backed away from that map, hoping to return to a plan that provides for only one majority-minority district.    
     
The Supreme Court’s consideration of the Louisiana case has stretched across two terms. The justices failed to resolve the case last term and chose to order a second round of arguments this term adding a new question: Does the state’s intentional creation of a second majority-minority district violate the constitution’s Fourteenth and Fifteenth Amendments’ guarantee of the right to vote and the authority of Congress to enforce that mandate?    
Following the addition of the new question, the state of Louisiana flipped positions to oppose the map it had just drawn and defended in court. Whether the Supreme Court follows suit remains to be seen. But the tone of the October argument suggested that the court’s conservative supermajority is likely to continue undercutting the 1965 Voting Rights Act.   

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Map: Earthquake Shakes Central California

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Map: Earthquake Shakes Central California

Note: Map shows the area with a shake intensity of 3 or greater, which U.S.G.S. defines as “weak,” though the earthquake may be felt outside the areas shown.  All times on the map are Pacific time. The New York Times

A minor earthquake with a preliminary magnitude of 3.5 struck in Central California on Monday, according to the United States Geological Survey.

The temblor happened at 7:17 a.m. Pacific time about 6 miles northwest of Pinnacles, Calif., data from the agency shows.

As seismologists review available data, they may revise the earthquake’s reported magnitude. Additional information collected about the earthquake may also prompt U.S.G.S. scientists to update the shake-severity map.

Source: United States Geological Survey | Notes: Shaking categories are based on the Modified Mercalli Intensity scale. When aftershock data is available, the corresponding maps and charts include earthquakes within 100 miles and seven days of the initial quake. All times above are Pacific time. Shake data is as of Monday, March 2 at 10:20 a.m. Eastern. Aftershocks data is as of Monday, March 2 at 11:18 a.m. Eastern.

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