Danske to forgo profit from dirty deals in Estonia
Danske Bank says it will forgo profits made from transactions in Estonia that are subject to a money-laundering probe and its 2018 net profit will be at the low end of its target range.
Shares in Denmark’s biggest lender have fallen 25% since March as allegations its Estonia branch was involved in money laundering from 2007 to 2015 intensified. Its shares took another hit on Wednesday, plunging as much as 10% to a two-year low after it reported disappointing second-quarter earnings and was more precise about its full-year outlook.
In addition, the stock was hit by investor concern over share buybacks that run until 2019. The prospect of reaching the 9.4-billion Danish krone ($1.5bn) forecast was “hopeless”, said ABG Sundal Collier analyst Mads Thinggaard.
The bank has admitted to flaws in its controls to prevent money laundering in Estonia and has launched its own investigation into the allegations.
A newspaper report in July said Danske laundered up to $8.3bn in Estonia from 2007 to 2015 — twice the amount initially reported by the newspaper.
Danske Bank said on Wednesday that it should not benefit financially from any “suspicious transactions” in Estonia.
“Consequently, it is Danske Bank’s intention to make the gross income generated from such transactions in the period from 2007 to 2015 available for efforts that support the interest of the societies in which we operate, such as combating international financial crime,” it said in a statement.
Gross profits from its nonresident portfolio in Estonia from 2007 to 2015 amounted to 1.5-billion Danish krone but it was not clear how much of that amount Danske would waive, CEO Thomas Borgen said. “It is a complicated exercise, it is millions of transactions,” he said.
The bank is due to present the findings of its internal investigation in September. It said it had hired Philippe Vollot as the new chief compliance officer, replacing Anders Meinert Jorgensen, who resigned last week following an “intense” period.
Vollot joins by December 1 from Deutsche Bank, where he heads the bank’s global antifinancial crime and antimoneylaundering efforts.
Earlier in July, Denmark’s new business minister said Denmark’s financial watchdog
I COMPLETELY AGREE WITH DANSKE BANK THAT IT CAN’T KEEP THAT MONEY. GOOD THAT THEY RECOGNISE THIS
could open a new investigation as the bank’s own investigation might not be enough.
“I completely agree with Danske Bank that the bank can’t keep that money. Good that they recognise this,” business minister Rasmus Jarlov said on Twitter on Wednesday.
For now, analysts on average put estimates for potential fines at 4-billion krone.
Danske Bank reported a pretax profit of 5.49-billion krone for the three months to June 30, down from 6.18-billion krone a year earlier. Analysts had forecast profit of 6.02-billion krone.
The bank said that it still expected a net profit for the year of between 18-billion krone and 20-billion krone, but that it would probably be at the lower end of that range due to weaker trading income.