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Danske Bank Gains Affect by Higher Costs, Low Rates of Interest

Danske Bank’s second-quarter pre-tax revenue came in below expectations on Thursday, hit by low rates of interest and higher costs related to compliance following a money-laundering scandal at its Estonian department.

Second-quarter pre-tax earnings declined to 4.76 billion Danish crowns ($716.6 million) from 5.49 billion in 2018, lacking a median forecast of 5.06 billion by analysts per Refinitiv data.

Danske Bank, whose shares have plunged over 40% over the last year, reduce its gains outlook July 8, partly as a consequence of higher costs associated with agreement and anti-money laundering actions.

In a scandal that has rocked the Nordic banking sector, Danske said last year it had directed 200 billion euros of suspicious payments via its Estonian department between 2007 and 2015.

Danske said it anticipated to have to include to its capital reserves after retail clients had been deceived fees about a funding product referred to as Flexinvest Fri and also due to an inspection into its IT governance structure. The bank mentioned this might be in the mid-single-digit billion Danish crown range.

Danske stated in June it would compensate nearly 87,000 Flexinvest Fri clients who had been overcharged, which would cost the financial institution approximately 400 million Danish crowns this year and further weighing on prices this quarter.

The bank has already risen its capital requirements by 10 billion Danish crowns reserved for “elevated compliance and reputational risks” after the Estonia money laundering scandal in response to commands from the Danish financial regulator.

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