In an out-of-court settlement Warburg agreed to paid pounds 33m damages and pounds 2m costs to Yeoman, though it did not admit liability.
Yeoman had been claiming pounds 115m in damages as a result of its disastrous takeover of the rival group CLF five years ago. Yeoman paid pounds 93m for the company but found that it was making large losses and had to launch a rescue rights issue.
It sued Warburg and the City lawyers Linklaters & Paines, which advised Yeoman, for the difference between what it paid for CLF and what, in hindsight, it was really worth. The amount was inflated by interest costs.
Warburg refused to admit how much it paid, saying it would have an insignificant effect on the group's profits, but the true amount emerged in Ireland.
Warburg, though, may only have to bear a small percentage of this, as the lion's share is covered by the bank's professional indemnity insurance at Lloyd's of London.
The other defendant, Linklaters, paid nothing to Yeoman and only has to bear its own costs, which are covered by the Law Society's solicitors' indemnity insurance.
The trial started two weeks ago but was adjourned on Monday last week after barristers' opening statements. Mr Justice Buckley adjourned proceedings to read amended witness statements after Robert Gillespie, the Warburg director who advised Yeoman, said he had made some mistakes in his statements and wished to change them.
The out-of-court settlement is an embarrassment to Warburg, which had always maintained that it was not at fault and had resolutely refused to note the legal action as a contingent liability in its accounts.
It follows the pounds 172m damages awarded against Samuel Montagu, the merchant bank owned by Midland, after it was sued by British & Commonwealth Holdings, which is now in administration.
Montagu had said that a US-controlled financial group, Quadrex, was good for the money when it had agreed to buy two of B&C's subsidiaries, but Quadrex was unable to complete the deal.
Warburg was also censured by the City Panel on Takeovers and Mergers over its advice to the supermarket group William Low, which had announced a deal to take over its rival, Budgens.
The deal fell apart and it was found that Warburg had not pursued offers of financial information from Budgens' advisers, Kleinwort Benson, which might have prevented the debacle.
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