Investors hoping for a return of share buybacks at Danske Bank A/S may have to wait longer as there are legal issues still to be resolved even after a long-running money laundering probe has ended, Barclays says.
(Bloomberg) — Investors hoping for a return of share buybacks at Danske Bank A/S may have to wait longer as there are legal issues still to be resolved even after a long-running money laundering probe has ended, Barclays says.
Denmark’s largest lender has plenty of excess cash that could be returned to shareholders following the conclusion of criminal and regulatory investigations surrounding its involvement in the scandal late last year, analyst Namita Samtani says in a client note.
However, Danske Bank still has civil claims filed against it by institutional investors with a current total claim amount of 12.8 billion Danish kroner ($1.9 billion), she said. Also, according to the plea agreement related to the money-laundering case, Danske has agreed to review and update its compliance programs as well as periodically report its progress to the US Department of Justice. For example, a report is due no later than one year after the agreement was executed, it said.
“We believe resuming buybacks shortly after a settlement with the DoJ, particularly if the DoJ does not find Danske’s compliance updates satisfactory, could create the wrong perception,” she said.
Barclays estimates that Danske Bank has around 150 basis points of excess capital as of the first quarter and forecasts a 20.1 billion-krone net profit this year, potentially creating further excess capital.
“We believe this is trapped capital which investors should not pay for,” she said.
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