Danske says it's committed to buybacks despite laundering probe

COPENHAGEN: Danske Bank A/S is pushing back against risks that Denmark’s financial supervisor will halt share buybacks after reopening an investigation into the laundering of billions of dollars in dirty money.

Denmark’s biggest bank plans to continue with its 10 billion-krone (US$1.6bil) buyback programme, Morten Mosegaard, interim chief financial officer, said on Monday.

“We have no intention of calling that off,” Mosegaard said. “The money has already been deducted from our capital position at this point.”

Jesper Berg, the head of the Danish Financial Supervisory Authority, reopened an investigation into Danske last week, after the lender admitted that a large share of about US$235bil that flowed through an Estonian unit between 2007 and 2015 may have been laundered.

He says the FSA is considering all its options in connection with the investigation. A halt to share buybacks would only happen in the case of “material issues” with capital planning. He said Danske is well capitalised.

Companies need FSA approval before initiating buyback programmes.

Danske is two-thirds of the way through its current buyback programme, which was announced in February and is due to run into early 2019. As of Sept 24, the bank had bought 31.8 million shares with a gross value of 6.6 billion kroner.

Questions around the feasibility of continuing the share buyback programme repeatedly arose during a conference call with Danske’s management on Sept 19.

That was the day the bank released its internal report on the laundering scandal and announced the departure of chief executive officer Thomas Borgen.

The FSA has already forced Danske to add almost US$800mil to its capital burden, in connection with the laundering case. The Danish government says the bank may face a fine as high as US$630mil in Denmark alone, while other countries are also looking into the scandal, including the US and the UK Danske may face total fines as high as US$1.7bil, according to Handelsbanken.

For now, the bank hasn’t made any provisions to cover such penalties. Management says the roughly 1.5 billion kroner it earned at the Estonian unit at the center of the scandal has been earmarked for a “donation” to society, though no clear recipient has yet been identified. The key question is whether the U.S. might weigh in, in which case the risk of hefty fines grows considerably. Danske said last week that it’s reviewed 15,000 customers against sanctions lists and has so far found no violations. But the bank hasn’t completed its review of non-resident customers at the Estonian branch, including matching them against suspicious counterparties. The probe got through 6,200 named customers and still has 8,800 to go.

That figure doesn’t include the beneficial owners of UK shell companies and the end clients of so-called intermediaries in Russia and former Soviet republics, whose names Danske routinely failed to record, according to its own report. These intermediaries were “unregulated and represented unknown end-customers,” the report said.—