Danske Bank’s brutal stock selloff may have gone much too far

Danske Bank may be undervalued, according to analysts covering the stock.

Photo: Ints Kalnins/Ritzau Scanpix

A punishing selloff triggered by a money laundering scandal may have left Danske Bank badly undervalued, according to analysts covering the stock.

That means that shares in Denmark’s biggest financial group could be poised to soar more than 50 percent in the coming year, according to the average estimate of 24 analysts tracked by Bloomberg.

The gap between where analysts expect Danske to be trading in 12 months and the lender’s current price is now the biggest among banks in the Stoxx Europe 600. The potential for a rebound in Danske’s shares takes into account a wave of analyst downgrades, with price estimates falling an average of about 20 percent this year.

Denmark’s biggest bank has achieved near-pariah status as the laundering scandal frightens off bond and equity investors and draws denunciations from politicians. The bank has admitted that about $235 billion that flowed through a tiny unit in Estonia may need to be treated as suspicious transactions, with numerous employees reported to the police and Chief Executive Officer Thomas Borgen relieved of his duties.

The U.S. Department of Justice is now investigating the case, joining probes in Denmark, Estonia, Switzerland and the U.K., and the development is fueling concerns that Danske may face hefty fines. 

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