Friday, December 2, 2022

Danske Bank Prepares to Pay $2B in Money-laundering Fines

-

Danske Bank (DANSKE.CO) on Thursday booked a 14 billion Danish crown ($1.89 billion) provision, edging closer to a long-awaited settlement with authorities over its involvement in one of the world’s biggest money laundering scandals.

Denmark’s biggest lender had said it faced a potentially “material” fine over its involvement in the scandal, in which more than 200 billion euros ($200.98 billion) in suspicious payments were funnelled through its now closed Estonian branch.

- Advertisement -

Danske said discussions with authorities, namely the U.S. Department of Justice and the Securities and Exchange Commission (SEC) as well as the Danish Special Crime Unit, were ongoing and there was no certainty regarding the outcome.

“The discussions with U.S. and Danish authorities related to the Estonia matter are now at a stage where Danske Bank can reliably estimate the total financial impact of a potential coordinated resolution,” CEO Carsten Egeriis said.

The bank said is working towards a resolution before the end of the year, but that the timing was beyond its control.

- Advertisement -

The news sent shares in the bank up as much as 12% to their highest level since mid-June, although the stock remains at less than half its value before the money laundering case was revealed in 2017.

“Finally we have what we’ve waited for almost five years,” said Sydbank analyst Mikkel Emil Jensen. “This has hung over the bank like a heavy blanket, so a great deal of uncertainty is now removed from the stock.”

Estimates for the size of provision related to the Estonia case have varied from around 10 billion crowns to more than 20 billion crowns.

Denmark’s biggest lender has struggled in recent years to improve profit margins, trailing other large Nordic banks by several percentage points, mainly due to higher costs for anti-money laundering measures and other remediation efforts.

- Advertisement -

“The bank still has a real legacy problem. It is spending so much on anti-money laundering measures and has too little profits,” Nordnet analyst Per Hansen said in a note.

The provision booked in the third quarter prompted Danske’s board to annul a dividend of 5.5 crowns per share meant to be paid out each quarter this year and recommend no dividends would be paid out for 2022.

It maintained its 2023 financial targets on Thursday, which includes a return on equity (RoE) of between 8.5% and 9%. Return on equity in the third quarter came in at 5%, excluding the impairment from the Estonia case.

Danske Bank expects a net loss “better than” 5.5 billion crowns this year, down from a previous forecast for a 10 billion-12 billion crowns net profit.

Danske Bank in 2018 booked a separate provision of 1.5 billion crowns, bringing the total financial impact from a potential resolution of the Estonia case to 15.5 billion crowns.

($1 = 7.3921 Danish crowns)

($1 = 0.9951 euros)

NEWSLETTER

Get our daily notification on the latest financial crimes news around the World

MUST READ

Advertisement
Advertisement

This Week