(Bloomberg) -- Danske Bank A/S (CO:DANSKE) slumped the most in more than two years after reporting second-quarter results that missed analyst estimates and as management set aside money potentially linked to laundering crimes after the Danish government said it will confiscate such funds.
Shares in the Copenhagen-based lender sank as much as 9 percent, the most since June 2016. The selloff pushed Danske to the bottom of the Bloomberg index of European financial stocks, which was down about 0.7 percent.
Denmark’s biggest bank said it may pay back about 1.5 billion kroner, or about $230 million, from its profit as it tries to deal with allegations it helped launder billions in illicit funds over several years.
Danske said on Wednesday that the amount corresponds to estimated gross income from 2007 to 2015 from the non-resident accounts in Estonia that are at the center of the laundering scandal.
“As the comprehensive investigations, which are anchored in the Board of Directors, have not been finalized, it is too early to determine the amount to be made available,” the bank said. “Conclusions from the investigations will be reported by September 2018. The amount and the way in which it will be made available will be decided after we have concluded on the investigations.”
The bank said it will make the money “available for efforts that support the interest of the societies in which we operate, such as combating international financial crime.”
The bank also appointed a new chief compliance officer, Philippe Vollot, who is due to start no later than Dec. 1. He comes with “significant international experience -– not least within the combating of financial crime and money laundering,” Chief Executive Officer Thomas Borgen said in the statement. Vollot had previously worked at Deutsche Bank AG (DE:DBKGn), where he was global head of anti-financial crime & group anti-money laundering officer.
The announcement was made in connection with the bank’s second-quarter earnings report. Danske reported net income that was slightly below analyst estimates, though management was able to write back 377 million kroner in bad loans. The bank said it now expects net profit in 2018 to be at the lower end of a previously announced target range of 18 billion kroner to 20 billion kroner.
For the last 1 1/2 years, a steady stream of reports by the Berlingske newspaper has placed Danske at the center of a massive laundering scandal in Europe. Well over $8 billion in dirty money was allegedly funneled from from Russia, Moldova and Azerbaijan through the bank’s Estonian office in the years 2007 to 2015.
Danske this month became the subject of a criminal complaint by Bill Browder, co-founder and CEO of Hermitage Capital. Browder links some of the laundered funds to the death of his lawyer, Sergei Magnitsky, who ended his days in a Moscow prison in 2009 after uncovering the scheme. Browder filed his complaint with Denmark’s State Prosecutor for Serious Economic and International Crime, as well as the Danish Business Ministry.
The Danish state prosecutor says it’s treating the case “particularly seriously” and is working with “several countries” to get to the bottom of the allegations against Danske. The Danish government and central bank have said the scandal risks damaging the entire country’s reputation. Business Minister Rasmus Jarlov says the Financial Supervisory Authority is investigating new evidence as it becomes available.
(Updates with shares.)