The costs of Danske Bank are affected by rising costs as it puts money aside for a possible money laundering fine

Danske Bank 's second quarter pre – tax profit was lower than expected on Thursday as the Danish lender citing low interest rates and higher regulatory costs as a result of a money laundering scandal. money in his Estonian branch.

Pre-tax profits for the second quarter fell to 5.79 billion kronor ($ 717.47 million), compared to 4.76 billion kroner the previous year.

Reported net profit of 4.0 billion crowns was in line with Danske's preliminary estimates for the second quarter of early July.

Dankse Bank Chief Financial Officer Christian Baltzer told CNBC's "Squawk Box Europe" channel on Thursday that a significant investment was being made in compliance and regulatory functions, generating additional costs.

"We have not planned any provision, but we have set aside a capital of 10 billion (Danish kroner) in our capital reserve for a potential fine and the ramification of the problem of AML (fight against money laundering). money, "he said. , adding that the bank maintained a "permanent dialogue with the FSA (Financial Supervisory Authority)" around its own capital requirements.

Danske Bank shares have fallen more than 40% over the past year, after revealing in 2018 that it had shipped 200 billion euros of suspicious payments through its Estonian branch between 2007 and 2015.

In June, the bank announced that it would compensate about 87,000 customers who had been overtaxed for investment products, at a cost of about 400 million kroner.

Mr Baltzer said that managing a bank in the modern era was a much more expensive exercise because of regulatory spending, both in terms of capital requirements and new investment guidelines. conformity.

"Finding the right balance in a low-margin environment to effectively manage a bank, but also to make a profit and have competitive products, is a balance that the bank winners will have to find tomorrow," he added.

"We need to find the right ways not only to cost customers, but also to be more effective in implementing our compliance and regulatory environment."

European banks suffered a sell-off in the second quarter of 2019, losing more than 13% in the last three months and falling 18.64% over the past year.

However, they have started to rebound slightly in recent weeks, gaining 5% in the last 30 days.

– Reuters contributed to this report.