Danske says it can absorb ‘large’ fines amid laundering row

Bloomberg

Danske Bank A/S said it will be able to absorb “large” fines as Denmark’s biggest bank awaits the outcome of criminal investigations into its role in one of Europe’s worst ever money laundering scandals.
The bank, which said it faces a “huge task” trying to restore trust with customers and investors, hasn’t yet set aside provisions for a potential penalty, arguing it’s still too early to predict how much it may be facing.
Analysts have published estimates as high as about $8 billion, while the bank’s market value has slumped about $16.5 billion this year.
Danske admitted in September that much of about $230 billion that flowed through a tiny Estonian unit might need to be treated as suspicious in origin. Management is in an ongoing dialogue with authorities in the US, Denmark and Estonia in connection with criminal investigations into the case, the bank said.
The Copenhagen-based lend-er has already made a “donation” to society of 1.5 billion kroner ($230 million) based on profits it made at the Tallinn-based unit at the heart of the scandal. It’s also been forced to add 10 billion kroner to its regulatory capital in connection with the case, prompting management to cancel this year’s share buyback program.
But the bank used the report to provide details of its campaign to talk to clients and investors, and to build up its compliance efforts to make its business impenetrable to those trying to commit financial crimes. Investors welcomed the update, and shares in Danske gained as much as 6.5 percent in Copenhagen, marking the bank’s best performance since February 2016.
At Jyske Bank, analyst Simon Hagbart Madsen said the report offered “better insight” into the short-term effects of the laundering case on Danske’s business.
In an interview, interim Chief Executive Officer Jesper Niel-sen said “we’ve been very prudent in terms of capital and can basically withstand large fines or sanctions.” He also said the financial impact of the scandal has been “limited so far,”
and that the bank is doing what it can to fight the threat of a customer exodus.
The interim CEO also said the bank is investing “massively” to “combat financial crime,” in an interview with Bloomberg Television. Danske is taking a very different approach to capital management, as it awaits news of a potential fine. “We are more preoccupied with being seen as prudent in terms of capital these days than necessarily handing back capital to shareholders,” he said.
Nielsen became CEO in October, when Danske removed Thomas Borgen for his role in the laundering scandal. Nielsen has ruled himself out as a candidate for the job in the long term. Danske tried to win regulatory approval for its head of wealth management, Jacob Aarup-Andersen, to become CEO, but failed. It didn’t provide any further updates.
According to the bank’s updated factbook, it lost about 8,000 customers in Denmark last quarter, as Danes learned the full scope of the laundering scandal. Per Hansen, an investment economist at Nordnet, said “one could have feared a bigger exodus.” But he also notes that there’s an expectation that customer flight will continue in coming quarters, though it appears “Danske Bank will stand its course.”