Danske punished over money laundering scandal

COPENHAGEN: Danske Bank A/S has now become one of Europe’s worst performing financial firms as investors balk at the lack of transparency around the lender’s money laundering scandal.

At Kepler Capital Markets, the situation has prompted analyst Robin Rane to announce he’s “throwing in the towel” and no longer advising clients to buy Danske shares. At Svenska Handelsbanken AB, analysts say they’re reviewing their buy recommendation because they “do not have enough visibility” around the case. Jyske Bank analyst Simon Madsen calls Danske’s laundering case a “black box”.

Shareholders in Denmark’s biggest bank appear to be losing their nerve. Last week, Danske suffered its worst selloff since July, driving the loss in its market value this year to almost 30%. Only Deutsche Bank AG and Commerzbank AG have performed worse.

Danske is the target of criminal investigations in Denmark and Estonia after its operations in the Baltic country were allegedly used to launder as much as US$9bil in funds, mostly from Russia, between 2007 and 2015.

The bank, which may face fines as big as US$800mil according to Bloomberg analyst surveys, has repeatedly declined to provide a clearer picture of what happened until its internal analysis is published.

After months of telling investors and the media to hold off before drawing any conclusions about its laundering case, Danske said late on Monday afternoon it will publish the findings of its long-awaited internal probe on Sept 19. But that announcement did little to resuscitate the stock.

Rane at Kepler said lessons learned from other banks dealing with similar allegations of financial crime “show us that banks with large potential contingent liabilities do not outperform while the case is ongoing.”

Last week, Danske chairman Ole Andersen acknowledged that the amounts of money potentially linked to the laundering scandal appear to be bigger than first thought, but said only “verified facts” should be taken seriously.

Andersen’s comments followed a Wall Street Journal report last Friday that as much as US$150bil flowed through the bank’s Estonian unit during the years in question. Danske has declined to comment on that figure, but cautioned against reading too much into it. Not all transactions are likely to be suspicious, according to analysts.

Chief executive officer Thomas Borgen, who was head of international banking at Danske while much of laundering was allegedly taking place, has publicly apologised for not acting sooner. But speculation is growing that he may need to step down. According to a Bloomberg survey of nine analysts conducted before the Wall Street Journal report, the likelihood of Borgen continuing until the end of this year is about 50%. By the end of 2019, the analysts put the probability at about 40%.

Some investors have already decided to take a step back from Danske Bank as the laundering case grows. MP Pension, which has about US$20bil in assets under management, said over the summer that it has put the bank on its blacklist, halting all purchases in its shares.

ATP, which oversees more than US$120bil and is also a Danske investor, says it’s “discontent with the lack of urgency the board has displayed in initiating the investigation.”

“They should have acted more promptly, acknowledging the severity of this case right away,” Stephan Ghisler-Solvang, head of communications at the fund, said in an email. — Bloomberg