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Danske Bank expects resolution of money-laundering case this year


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Danske Bank expects resolution of money-laundering case this year

It is a "fair assumption" that U.S. and Danish investigations into Danske Bank A/S' money-laundering case will be resolved this year, according to CEO Carsten Egeriis.

Danske, Denmark's largest bank by assets, is in discussions with U.S. and Danish authorities over its involvement in a money-laundering scandal in Estonia. A settlement or fine is "likely to be material," according to Danske.

The lender withheld dividends for the second consecutive quarter to ensure it has sufficient capital flexibility to deal with the outcome of investigations.

While Danske "cannot say with conviction anything on timing at this stage," according to Egeriis, the bank has in its 2023 cost target assumed that a resolution will be found in 2022.

"We announced that the discussions had started at the end of April and, therefore, we thought it was a fair assumption to think that that could be done this year," Egeriis said during an earnings call July 22.

Danske anticipates expenses to fall to 23.5 billion kroner in 2023, an 8% decline from the 25.5 billion kroner the bank has guided for in 2022. This will partly be driven by a 400 million kroner drop in legal fee expenses related to the Estonia case. Another 800 million kroner in savings will come from the final resolution of its debt collection case.

Danske said earlier this year that it is past the peak of costs relating to financial crime, and guided that full-year 2022 expenses would land at 25 billion kroner. The bank revised this estimate up to 25.5 billion kroner earlier in July due to sustained elevated costs for remediation of its legacy cases.

The U.S. Department of Justice, the U.S. SEC and the Danish Special Crime Unit are among the authorities investigating Danske Bank for its involvement in a money-laundering scandal in Estonia. Up to €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.

Danske is also being investigated by Estonian and French authorities in relation to the Estonia case, according to Danske's earnings report.

As of July 21, US$1 was equivalent to 7.30 Danish kroner.