Deutsche Bank Settles $545 Million Spanish Mis-Selling Case

Deutsche Bank AG has resolved a €500 million ($545 million) claim from a Spanish hotel chain over losses suffered on foreign-exchange derivatives sold by the lender.

Responding to Bloomberg questions about the status of the lawsuit from Palladium Hotel Group, the German lender said it has “resolved the matter.”

Palladium had claimed in its suit that the company was sold products by Deutsche Bank that it didn’t understand and, as a result, piled up derivatives with a notional amount as high as €5.6 billion. Palladium’s lawyers had said if the hotel chain had understood the risks involved, it would not have entered into any restructuring and would have unwound its outstanding trading portfolio with the bank sometime in 2015.

The Ibiza-based hotel chain is one of between 50 and 100 companies to say they have taken a hit from attempts to mitigate exchange-rate risks after buying complex FX derivatives from Deutsche Bank, Bloomberg has previously reported.

Deutsche Bank did not disclose the charge related to the Palladium settlement, but indicated it is included in “net litigation charges” of about €200 million that it has put aside for a number of legacy cases.

The impact of the settlement is “fully reflected in the guidance on litigation costs we provided for the second quarter,” the bank said in its statement.

The bank, which had previously said it would “vigorously” defend its position, added that it did not expect any additional impact in the third quarter or beyond.

Palladium didn’t immediately respond to requests for comment sent outside of normal office hours.

Deutsche Bank has previously said that it has been reviewing parts of its sales activities in structured FX derivatives. “As we and our regulators would expect, we are improving our processes and enhancing our controls,” the lender said.

The German lender still faces large legal challenges. In April, it announced it will book legal provisions of as much as €1.3 billion after a court indicated that it may partially side with claimants in a lawsuit filed by shareholders of Postbank AG, a competitor it took over 14 years ago.

The chances of the firm carrying out a second share buyback this year have become “less likely,” Chief Financial Officer James von Moltke said at its AGM several weeks later.

Top photo: Signage for Deutsche Bank AG at the bank’s office building in Singapore, on Thursday, April 18, 2024. Deutsche Bank plans to double the assets it manages for rich families in Southeast Asia and the Middle East over the next five years, tapping growing ties between ultra-rich clans in both regions, the lender’s global private banking head said. Photographer: Ore Huiying/Bloomberg.