Danske Says It's Committed to Buybacks Amid Laundering Probe

(Bloomberg) -- Danske Bank A/S is pushing back against risks that Denmark’s financial supervisor will halt share buybacks after reopening an investigation into the laundering of billions of dollars in dirty money.

Denmark’s biggest bank plans to continue with its 10 billion-krone ($1.6 billion) buyback program, Morten Mosegaard, interim chief financial officer, said on Monday.

“We have no intention of calling that off,” Mosegaard said. “The money has already been deducted from our capital position at this point.”

Jesper Berg, the head of the Danish Financial Supervisory Authority, reopened an investigation into Danske last week, after the lender admitted that a large share of about $235 billion that flowed through an Estonian unit between 2007 and 2015 may have been laundered.

He says the FSA is considering all its options in connection with the investigation. A halt to share buybacks would only happen in the case of "material issues" with capital planning. He said Danske is well capitalized. Companies need FSA approval before initiating buyback programs.

Ramifications for Danske’s credit ratings

Since Danske released the results of its internal investigation on Sept. 19, ratings companies have cut their assessments.

  • S&P says that over the next 18 to 24 months it could lower the bank’s issuer credit rating if fines weaken the bank’s capital or eat into earnings, or the scandal otherwise causes “lasting damage.” It lowered the bank’s stand-alone rating and that of its pension unit, as well as that of its hybrid debt
  • Moody’s changed its outlook to negative from stable, and says a reversal would depend on evidence that the Estonian case hasn’t had a “material negative impact”
  • DBRS warned that a substantial fine could lead to a ratings downgrade; the ratings company had already cut Danske’s trend rating in July, to stable from positive, citing laundering investigations
  • Fitch cut Danske’s outlook to negative from stable, pointing to the potential impact on the bank’s capital, franchise and funding profile from the scandal