Danske Faces ‘Years’ of Damage Control as Bank Replaces Chairman

(Bloomberg) -- The man poised to become chairman of Danske Bank A/S is aware that the task ahead is huge.

If elected to the post this month, Karsten Dybvad says he and the board will spend the “coming years” trying to “restore confidence in the bank.”

The 62-year-old trained economist has been handpicked by Danske’s biggest shareholder, A.P. Moller Holding A/S. The investor wants Dybvad to replace Ole Andersen, whose continued presence became untenable after he allowed the bank to be engulfed by one of Europe’s worst ever money laundering scandals.

Investors are instead about to get a man who spent years as a civil servant wandering the halls of power popularized in the TV series Borgen. Dybvad, who’s currently the head of the Confederation of Danish Industry, has had a very different career path from his predecessor.

The change has been greeted with enthusiasm by the market, with Danske shares rising almost 7 percent the day after the announcement. The development has even pushed the bank up a notch on the list of Europe’s worst financial stocks. It’s now only the second-worst bank this year, after Deutsche Bank AG.

Different Strokes

Dybvad is set to replace a financier who climbed the ranks targeting senior positions in private equity before turning the role of chairman into a life’s work at some of Denmark’s biggest companies. Andersen still sits at the head of the board of Danish luxury TV and stereo maker Bang & Olufsen A/S.

But the former titan of Denmark’s corporate elite is now associated with one of the biggest scandals to hit the country this century. Under Andersen’s watch, Danske has become the subject of multiple criminal investigations, including in the U.S., amid allegations it laundered billions of dollars, much of it from Russia.

Danske has admitted that a large part of about $230 billion that flowed through a tiny Estonian unit was probably suspicious in origin. Dybvad says that the business leaders he’s spoken with have expressed “deep worries” about what has happened to Danske. The concerns have been “universal,” he said.

For the Danes, the crisis surrounding their biggest bank has been a seminal moment. “This bank is a keystone in Denmark,” Dybvad said. Even the name -- Danske literally means Danish -- is a part of the nation’s identity, he said.

Gauging the Indignation

A.P. Moller Holding used its 20 percent stake in Danske to convene an extraordinary general meeting, due to take place within two weeks. Andersen’s won’t be the only head to roll, with the main investor pushing for several changes to the board.

Dybvad says he’s spoken not just with corporate leaders to gauge the level of indignation, but also with regular Danes. “I have experienced very many Danes expressing concern,” he said.

The chairman’s first task will be to try to find a chief executive officer for Danske. Andersen botched the process after his protege, Jacob Aarup-Andersen, was rejected by the Danish regulator, which deemed the 40-year-old head of wealth management too inexperienced for the job. (Thomas Borgen was removed as CEO in October for his role in the laundering scandal.)

Dybvad didn’t want to discuss his thoughts on a possible candidate for the CEO, underscoring again that he still hasn’t been elected chairman.

Ultimately, the latest developments at Danske underscore the fact that “it’s the shareholders actually deciding who sits on the board,” he said. “And they’ve made a decision and the implications of that should be very clear.”

To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net;Christian Wienberg at cwienberg@bloomberg.net

©2018 Bloomberg L.P.