Analysts covering Danske Bank A/S see a 33% chance that Chief Executive Thomas Borgen will continue in his role through 2018.
That probability falls to 25% when the same analysts were asked how likely it is that Borgen, 54, will still be running Denmark’s biggest bank in 2019. The Bloomberg survey is based on responses from six research analysts who provide client recommendations on Danske.
The survey gives Danske Chairman Ole Andersen, 62, a slightly better chance of survival, with analysts predicting, on average, that he has a 54% chance of continuing in his role through this year. But when it comes to 2019, that probability drops 29%.
The responses follow allegations that Danske’s Estonian unit became a central pipeline in Europe for laundering as much as $9 billion between 2007 and 2015 in dirty money, mostly from Russia. In May, the Danish Financial Supervisory Authority said “massive failures” at the highest levels of management led to the breaches, prompting Borgen to publicly apologize for not reacting sooner to the suspicious flows in Estonia.
Danske spokesman Kenni Leth said, “We don’t have any comments. We are looking forward to sharing conclusions from the investigations on Wednesday.”
The bank is now the subject of criminal investigations in Denmark and Estonia, and is due to release the findings of its own internal probe on Sept. 19, with a press conference set to take place at 10 a.m. in Copenhagen that day. The Wall Street Journal reported on Friday that
The money laundering case has unnerved the bank’s investors, and Danske’s market value has slumped about 30% this year.
Already in 2012, the FSA said Danske was not doing enough to prevent being used to launder money, including scrutiny of “remote customers.” In its May report, the agency said that management had failed for years to heed red flags in Estonia, including returns of 402%.
Borgen was responsible for international banking from 2010 to 2012, before being promoted to head of corporates and then CEO, in 2013. Following the revelations, Borgen said he discussed his resignation with the board, but that it was agreed he should stay on.
In July, in connection with second-quarter results, Borgen said that he is ready to step down if that is what makes the most sense for the bank.
The survey was compiled this week after a number of news reports added to speculation regarding the laundering case. The Journal reported last week that as much as $150 billion flowed through Danske’s Estonian unit during the years being investigated, though it is not clear how much of that amount can be treated as suspicious transactions.
“I am a bit surprised at the reaction to the numbers that have come out so far,” said Mattias Frithiof, a credit analyst at Swedbank in Stockholm. “I think it is difficult to relate them to the amount of transactions that were related to money laundering.”
He notes that between 2007 and 2015, the total payment volume in Estonia was around 2.8 trillion euros, or $3.3 trillion, citing data from the country’s central bank. Frithiof estimates that Danske Bank’s share of cross-border payments appears to have peaked at 40% and averaged at around 8% from 2007 to 2015.
So “it is not obvious to me that the numbers are extraordinarily high,” he said. “But then again, I do not know exactly what the numbers refer to, so it is all speculation based on incomplete information.”
