Deutsche Bank AG
) now has a reason to rejoice. The bank has emerged victorious in
a legal conflict with Sebastian Holdings Inc. The latter is the
investment fund run by Norwegian billionaire, Alexander Vik.
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The conflict between Vik and Deutsche Bank began when the former
incurred huge losses of about $8 billion during the financial
crisis in 2008. Notably, Deutsche Bank acting as a broker asked
Sebastian Holdings for extra cash in foreign exchange margin
calls. A margin call is a broker's demand that an investor make
cash deposits to cover potential losses on trades.
However, Sebastian Holdings made considerable losses on foreign
exchange trading and options called Target Profit Forwards
(TPFs). Vik claimed that Deutsche Bank's negligence and
persistent errors relating to trading led to such losses.
Therefore, Vik filed a lawsuit against Deutsche Bank in a U.K.
High Court. On the other side, Deutsche Bank argued risks related
to the trading conducted were known to Vik prior to these
Therefore, the U.K. High Court judge ruled that Deutsche Bank did
not breach the contract with Sebastian Holdings. Further, the
judge ordered the offshore fund to pay the bank a compensation of
$236 million for unpaid broker services from 2008.
The favorable ruling is a relief for Deutsche Bank at a time when
it is burdened with other legal and regulatory woes. The banking
major's third-quarter profit has declined substantially year over
year due to litigation related expenses. Notably, the bank's
litigation reserves increased to €4.1 billion ($5.4 billion),
including €1.2 billion ($1.6 billion) of additional provisions
taken in the said quarter.
Deutsche Bank currently carries a Zacks Rank #1 (Strong Buy).
Other foreign banks that can be considered include
DBS Group Holdings Limited
Australia & New Zealand Banking Group
) and Westpac Banking Corporation (
), all of which has the same Zacks Rank as Deutsche Bank.