November 1, 2018 / 7:20 AM / 15 days ago

Danske Bank boss says to early to assess scandal damage

COPENHAGEN (Reuters) - Danske Bank’s (DANSKE.CO) interim chief executive said that it was too early to assess what damage Denmark’s largest lender had sustained from a 200 billion euro ($230 billion) money laundering scandal and warned of potentially “big” fines.

General view of the Danske Bank building in Copenhagen, Denmark, September 27, 2018. REUTERS/Jacob Gronholt-Pedersen

Danske’s third quarter earnings on Thursday showed the bank’s lending had increased across the Nordic countries, with solid activity among retail and commercial customers, giving its battered shares a welcome respite.

“We should be careful not to underestimate the undercurrent. Because if we look at the bank’s reputation, we can see that it is under pressure,” Jesper Nielsen told Reuters in a telephone interview following the results.

It was therefore too early to say whether the scandal could lead to a significant decline in business volumes, he said after Danske reported a 42 percent fall in third quarter pretax profit, largely the result of a previously announced donation it is making to initiatives to fight financial crime.

“One could have feared that a larger decline in the number of customers and a diminishing use of bank services could have had a greater negative impact,” investment economist Per Hansen said in a note as Danske shares rose by as much as 6.5 percent.

Investors have been worried about potential fines resulting from the money laundering case, which is the subject of criminal investigations in Denmark, Estonia and the United States.

Before Thursday’s increase, Danske’s share price had almost halved since February.

BIG FINES

Nielsen said potential fines resulting from investigations in payments through Danske’s Estonian branch between 2007 and 2015, many of which the bank said in September were suspicious, could be “big”. He declined to elaborate, adding that no subpoenas have been issued so far.

In order to help the investigations, Danske would relieve others of confidentiality clauses, as it has done in the case of whistleblower Howard Wilkinson, who helped expose the scandal, Nielsen said.

Danske said its pretax profit dropped to 3.59 billion Danish crowns ($547 million), missing the 3.72 billion expected by analysts in a Reuters poll, after the 1.5 billion crown donation following the money laundering affair.

Nielsen said it had not yet been decided which specific projects would be supported. However, if any income from the non-resident Estonian portfolio becomes subject to confiscation by relevant authorities, it would be deducted from the donation.

Danske stuck to its to its full-year forecast from September for a net profit of between 16 and 17 billion Danish crowns.

($1 = 6.5674 Danish crowns)

Reporting by Teis Jensen; Editing by Louise Heavens/Edmund Blair/Alexander Smith

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