Danske Bank A/S confirmed its profit outlook for 2022 as it presented its first-quarter earnings, but the projection does not include any effects from a potentially "material" fine related to its Estonian money-laundering case, according to CEO Carsten Egeriis.
It comes a day after Denmark's largest bank by assets said it would withhold dividends as it is in initial discussions with U.S. and Danish authorities regarding a resolution of the "Estonia matter."
The U.S. Department of Justice, the U.S. Securities and Exchange Commission and the Danish Special Crime Unit are among the authorities investigating Danske Bank for its involvement in a money-laundering scandal in which €200 billion of nonresident money flowed through the lender's Estonian branch from 2007 to 2015, of which a "significant" part was found to be suspicious, according to an internal probe in 2018.
"We are not yet able to reliably estimate the timing, the form of resolution or the amount of a potential settlement or fines, which is likely to be material," Egeriis said on an earnings call April 29.
Danske decided to withhold dividends to ensure prudent capital management, which is consistent with the bank's announcement in February that it would pay out dividends for 2021 profits in quarterly tranches throughout 2022 in order to gain flexibility to deal with the outcome of the Estonia case, the CEO said.
Danske Bank posted a net profit of 2.85 billion Danish kroner in the first quarter of 2022, down from 3.14 billion kroner in the same period last year, which the lender said was driven primarily by lower financial markets-related income.
Confirming previous guidance, the bank said it expects net profit to total between 13 billion kroner and 15 billion kroner for 2022 as a whole.
Asked whether Danske was likely to withhold more interim dividends throughout the year, Egeriis said any potential payments would be decided by the board on a quarterly basis.
Danske's capital buffers position it well to weather a material penalty, analysts have previously judged.
The bank's capital position remains strong, Egeriis said. Its common equity Tier 1 ratio stood at 17.6% at the end of the first quarter, 5 percentage points above the regulatory requirement of 12.6%. That corresponds to an excess capital above requirement of more than 42.7 billion kroner, or $6 billion.
The bank is also being investigated by Estonian and French authorities in relation to the Estonia case, according to Danske's earnings report, but it has not provided an update on the progress of those probes.
As of April 28, US$1 was equivalent to 7.07 Danish kroner.
