Deutsche Bank shares were down 5.5% in early trade on Monday after news that a long-running lawsuit could cost Germany's largest lender up to 1.3 billion euros ($1.39 billion).

The issue is a blow to Deutsche, which last week posted better-than-expected earnings that boosted its shares. It is the lastest in a string of problems that have arisen from its purchase of the no-frills Postbank.

Analysts at RBC cut its target price for Deutsche Bank, despite its "outperform" rating.

"It is disappointing that improved performance and a constructive operating environment are overshadowed by legacy litigation from a long time ago," RBC said.

Deutsche Bank last Friday unexpectedly announced that it would make a provision to offset possible claims in litigation in the suit.

It said it "continues to disagree strongly" with any view that it underpaid. The bank did not specify the amount it had set aside but noted that claims totalled about 1.3 billion euros.

The news followed better-than-expected earnings and a steep rise in its share price.

Deutsche said the provision would impact its second-quarter and full-year profitability.

($1 = 0.9325 euros) (Reporting by Tom Sims; editing by Friederike Heine and Jason Neely)