By Nina Trentmann and Kristin Broughton
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 6, 2019).
Danske Bank A/S on Thursday replaced its chief financial
officer, a move that comes as the Danish lender continues to deal
with a money-laundering scandal.
The Copenhagen-based bank, the country's biggest, said Stephan
Engels would become its finance chief in April 2020. Mr. Engels
currently holds the CFO role at Commerzbank AG, Germany's
second-largest bank, which expects to identify a new finance head
before Mr. Engels departs.
Mr. Engels replaces Christian Baltzer, who took over Danske's
finances in 2018. Danske named Jakob Aarup-Andersen, its current
head of wealth management, as interim finance chief until Mr.
Engels joins.
"I received an offer that allows me to take on an exciting
international challenge," Mr. Engels said Thursday in an internal
memo to Commerzbank employees. "It was not a conscious decision to
leave the bank because of one reason or another, but rather a
personal decision to pursue an opportunity that has arisen
elsewhere."
The appointment is part of a wider management reshuffle under
Chris Vogelzang, Danske's new chief executive, who started in June.
Chief Operating Officer Jim Ditmore also is leaving the bank,
Danske said Thursday. His duties will be performed by Mr. Vogelzang
until a successor is found.
Mr. Engels, who has been CFO of Commerzbank since 2012, is said
to be a hands-on executive with a reputation for adeptly tackling
complicated tasks such as cost cutting and risk management.
Before his time at Commerzbank, he worked in various positions
at German car manufacturer Daimler AG, including head of internal
audit, CFO at DaimlerChrysler Bank AG and head of management group
controlling.
Stephan Engels "brings strong execution expertise and management
experience from banking and other sectors," Mr. Vogelzang said in a
statement.
Danske faces regulatory probes from a host of U.S. and European
authorities over allegations of potential money laundering. And the
Danish Financial Supervisory Authority last week said it referred
the bank to the police for misleading customers with an investment
product.
Rising costs from investments in anti-money-laundering controls
have weighed on Danske's quarterly costs. The bank's operating
costs during the first six months of 2019 rose 12% from a year
earlier, to 12.8 billion Danish kroner ($1.9 billion), due in part
to hiring additional compliance staff.
"Costs are the key concern within Danske," said Marcell Houben,
a vice president at investment bank Credit Suisse Group AG. "Mr.
Engels has a track record of managing costs well, so that's a good
match." Frankfurt-based Commerzbank in 2016 launched a program
called Commerzbank 4.0 aimed at digitizing work flows, resulting in
about 9,600 job cuts.
Mr. Engels comes on board as Danske looks to strengthen its
internal systems and controls. Compliance lapses at its Estonian
branch stemmed, in part, from its use of a separate IT platform
from the rest of the bank, Danske said in a September 2018
report.
That meant the Estonian branch, whose nonresident portfolio
included customers from Russia, didn't use the same transaction and
risk-monitoring systems as the rest of the bank, Danske said in the
report. The separate system also gave its corporate headquarters
limited visibility into the branch's operations, the bank said.
Danske said this year that regulators ordered the bank to close
down the Estonian branch. The bank acquired it as part of its 2007
purchase of Sampo Bank, which was based in Finland.
Mr. Engels will also have to manage credit spreads on Danske's
debt, which could rise owing to the prospect of potential fines
related to the ongoing investigations, said Niklas Kammer, an
equity analyst at financial services firm Morningstar Inc.
"Investigations into anti-money-laundering cases can turn out to
take multiple years and therefore weigh on margins for a while,"
Mr. Kammer said.
Mr. Engels comes with plenty of compliance experience.
Commerzbank in 2015 agreed to pay $1.45 billion to settle
allegations of sanctions and money-laundering violations, resolving
investigations by U.S. and New York state regulators and law
enforcement authorities. The bank allegedly violated laws barring
transactions on behalf of Iran, Sudan, Cuba and Myanmar.
Danske and Commerzbank have both seen their profitability
decline amid negative interest rates that apply to large parts of
Continental Europe. That is putting pressure on the banks'
management to find new sources of revenue, said Håkon Astrup, an
equity analyst at brokerage firm DNB Markets Inc.
Mr. Engels, together with Mr. Vogelzang, will also have to
rebuild the reputation of Danske, Mr. Houben said.
Write to Nina Trentmann at Nina.Trentmann@wsj.com and Kristin
Broughton at Kristin.Broughton@wsj.com
(END) Dow Jones Newswires
September 06, 2019 02:47 ET (06:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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