Danske Bank has warned that its profits could almost halve this year as Denmark’s biggest lender remains under pressure from a €200bn money-laundering scandal and negative interest rates.
Net profit for 2019 was flat at DKr15.1bn ($2.2bn) compared with a year earlier but Danske forecast it would fall to between DKr8bn and DKr10bn this year.
Chris Vogelzang, Danske’s chief executive, said a range of factors had weighed on results including “low interest rates, margin pressure, higher impairments and increased costs due mainly to investments in compliance and [anti-money laundering-related] activities”.
Danske remains under criminal investigation by authorities in the US, France, Denmark and Estonia over a huge €200bn money-laundering scandal that took place over a decade in the Baltics and caused the bank to oust its chief executive and chairman.
Mr Vogelzang told the Financial Times that 2020 would be “a transitory year”. He added that the decline in profits was “an active choice to accelerate investments” in areas such as digitalisation, branding and compliance as well as in a cost savings programme.
The bank achieved a return on equity of 9.6 per cent in 2019, down from 9.8 per cent in 2018. It estimated its return on equity would be 5 to 6 per cent this year, only returning to the 9 to 10 per cent range by 2023 in line with forecasts it made in November.
Danske is also grappling with more than seven years of negative interest rates in Denmark with little end in sight. The country’s main policy rate is minus 0.75 per cent.
Mr Vogelzang reiterated that Danske would not follow many Danish lenders and impose fees on deposits of retail customers. “For the average Dane, we will not impose negative interest rates because I think it will lead to a complex situation,” he said, adding that Danske’s corporate clients were subject to negative rates.
Danske’s shares are still down by more than a half since the money-laundering scandal broke at the start of 2018 but have risen by a third from the seven-year low they reached in September. They fell 1 per cent on Wednesday to DKr113.35.
Mr Vogelzang has changed most of the top management at Danske, with a new chief financial officer and chief operating officer due to begin in April. He is aiming to gain control over Danske’s cost base after three profit warnings last year and amid uncertainty about the extent of any fines it could face in its money laundering probes.
Danske’s chief executive, who began in June after almost two decades at Dutch bank ABN Amro, stressed that the lender had maintained its dividend at DKr8.5 per share despite analysts forecasting an average of DKr7.29. Its fourth-quarter net profit of DKr5bn also beat the average analyst estimate of DKr4.4bn.
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