Danske Girds for New Capital Demands Amid Watchdog Crackdown

(Bloomberg) -- Danske Bank A/S said it is in talks with the Danish financial supervisor as it braces for potential additions to its capital requirements after the list of scandals under regulatory scrutiny grew.

“We expect capital requirements to be subject to change going forward,” the Copenhagen-based bank said on Thursday. The report follows a profit warning earlier this month, in which Danske said that extra compliance costs and a tougher trading environment forced it to lower its outlook for 2019.

Click here for an overview of Danske’s 2Q results

“We anticipate an additional Pillar II add-on in the mid-single-digit billion range. On the basis of our earnings capacity and capitalization, we are confident that we will be able to adapt to these changes in our capital requirements,” the bank said.

Once a star among European banks, Danske has been in survival mode since its Estonian money-laundering scandal erupted last year. As investors struggle to keep up with the newsflow, Danske’s shares have plunged by almost 60% since the beginning of 2018, equivalent to more than $20 billion in lost market value.

Danske is still waiting for the result of criminal probes across Europe and in the U.S., while a number of its former top people, including ex-chief executive officer Thomas Borgen, have had preliminary charges brought against them. More recently, the bank fired a former star executive, Jesper Nielsen, after it emerged that he’d overseen a unit that had overcharged retail investors.

In June, Danske brought in ABN Amro veteran Chris Vogelzang to run the bank. He has made clear that his first priority will be to rebuild trust.

Shares in Danske opened about 1% lower in Copenhagen, but traded higher by about 9:30 a.m. as investors digested the full report.

Christian Baltzer, Danske’s chief financial officer, said in an interview with Bloomberg TV that the bank’s ongoing review of suspicious transactions had so far uncovered no evidence of breaches of U.S. sanctions. He also said that Danske is “hoping” for a settlement with the numerous authorities investigating the bank.

Danske has said it plans to unveil measures later this year to help the bank perform better. On Thursday, it said that it’s still “making significant investments to combat financial crime, which drives costs upwards.”

“Given these circumstances and the conditions we are operating under, we see a need for initiatives to improve our financial performance and regain our business momentum,” it said.

--With assistance from Alastair Reed.

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

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