Danske Misses Consensus Due to Market Volatility; Maintain Fair Value Estimate

Danske Bank is a stable and conservatively run bank that follows a sound expansion strategy in the Nordics. However, uncertainties about fines related to the EUR 200 billion of potentially fraudulent transactions that flowed through its Estonian branch from 2007 to 2015 put significant pressure on its share price. We think the market largely overacts as there is little information to go on, which is typically not liked by investors. We expect fines by European regulators to be about DKK 3 billion, which Danske can absorb with excess capital of about DKK 9.5 billion on hand. Fines by U.S. regulators are potentially more severe, but also less likely.