Danske could absorb $3.3B money-laundering fine and still hit own CET1 target
Sanne WassRehan Ahmad, 29 March 2021
Danske Bank A/S’ capital levels and projected first-quarter earnings imply that it could withstand a money-laundering fine of 20.9 billion kroner, or $3.3 billion, today and still achieve its management common equity Tier 1 ratio target of 16%, according to S&P Global Market Intelligence estimates.
Even a penalty of more than double that size would still leave Denmark’s largest lender above its current regulatory requirement, the analysis found. “There is a long way to go before the fine becomes an issue for the bank’s capital ratio,” said Jyske Bank equity analyst Anders Vollesen in an interview.
Danske’s material capital buffer is driving down risk associated with the outcome of its Baltic dirty money scandal, according to analysts, with some even seeing scope for distribution of excess capital to shareholders through generous dividends or share buybacks once the case is settled.
Authorities in Estonia, Denmark, France and the U.S. are investigating the Danish lender for its involvement in a money-laundering scandal in which €200 billion of nonresident money flowed through the bank’s Estonian branch from 2007 to 2015, of which a “significant” part was found to be suspicious, according to an internal probe in 2018. Fine estimates made by analysts in recent months range from 4 billion kroner to 20 billion kroner.
A fine could be imminent, with the bank having finalized its second internal investigation and CEO Chris Vogelzang saying Danske is now in “waiting mode.”
