March 28, 2019 / 2:44 PM / 8 months ago

Breakingviews - Swedbank CEO exit still leaves iceberg of problems

A Swedbank branch located in downtown Stockholm is seen September 30, 2008. REUTERS/Bob Strong

LONDON (Reuters Breakingviews) - Swedbank’s attempt to cauterise wounds is unlikely to succeed. Its board on Thursday dismissed Chief Executive Birgitte Bonnesen and appointed Finance Director Anders Karlsson as an acting replacement following allegations that the lender was involved in money laundering in the Baltics. The problem for investors is that the scandal will last longer than her tenure.

Bonnesen’s departure was all but inevitable after three of the bank’s top five investors said they would vote against granting her freedom from liability for its latest financial results at the annual meeting later on Thursday. Despite Bonnesen’s recent denials the situation is eerily reminiscent of Danske Bank, which is currently under investigation in Denmark and the United States because many of the 200 billion euros worth of payments that flowed through its tiny Estonian branch between 2007 and 2015 were subsequently deemed to be suspicious. The Danish bank’s CEO was also forced to step down after initially trying to ride out the storm. The fact that Bonnesen was in charge of Swedbank’s Baltic banking business between 2011 and 2014 did her no favours.

The bank’s dismissive initial response, followed by a hasty and heavily-redacted report into the issue, looked hapless at best. Shares have lost a quarter of their value since new allegations of money laundering surfaced last month on the Swedish public broadcaster SVT.

True, a more substantial internal investigation is underway. And a drop of 65 billion Swedish crowns ($7.2 billion) in the bank’s market capitalisation might look harsh given Danske has suffered a 97 billion Danish crowns ($14.5 billion) loss in equity value and is under investigation for much larger sums. But investors have limited visibility. Until the fog clears, a new boss can do little to staunch the wounds.

- Dates in the second paragraph have been corrected to “2007 and 2015” from “2007 and 2017”

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