The resignation of Danske Bank A/S CEO Chris Vogelzang in the middle of its transformation program came as a great surprise to market observers. That it was caused by money-laundering suspicions is in particular an embarrassment for the Danish bank, according to one analyst, given it originally brought in Vogelzang to repair its image after a dirty money scandal.

Yet onlookers say the timing could have been worse and consider his replacement, Carsten Egeriis, well-placed to continue the bank's strategy towards 2023.

Vogelzang was chief executive of Denmark's largest bank for less than two years. He stepped down on April 19 after being named a suspect in connection with Dutch authorities' money-laundering probe at ABN Amro Bank NV, where he was an executive until early 2017.

The news comes at an awkward time for Danske Bank, which itself is being investigated by European and U.S. authorities for its involvement in a money-laundering scandal that saw up to €200 billion worth of suspicious cash flow through its Estonian branch from 2007 to 2015. The case led to the resignation of Thomas Borgen as CEO in late 2018.

Given these circumstances, Vogelzang, who took on the role in June 2019, in a statement said he did not want "speculations about my person to get in the way of the continued development of Danske Bank."

Egeriis, who has been Danske's chief risk officer for close to four years, replaces Vogelzang with immediate effect, the bank said.

Unexpected news

Vogelzang's resignation came "out of the blue" and was as such a "huge surprise," said Jyske Bank analyst Anders Vollesen in an interview.

Danske is in the middle of a transformation program toward 2023, spearheaded by Vogelzang himself. Being associated with another money-laundering scandal is "embarrassing" for Danske and could negatively impact its image, Vollesen said.

Yet he does not expect the leadership change to affect the bank's bottom line and earnings potential as Danske's transformation strategy is already "well-defined and in the process of being executed."

The slight drop in Danske shares in early trading can be attributed to normal daily market fluctuations and not the market reacting to the news, said Vollesen. As of 4:00 p.m. Copenhagen-time, Danske's stock was down 1.58% on previous close.

Sydbank analyst Mikkel Emil Jensen agreed that "the timing could have been worse."

"The strategy has already been laid out and Carsten Egeriis has helped to formulate and prepare this strategy, so his job is now to continue on the track that the bank is already on," Jensen said in an interview.

Danske's transformation program, which involves significant cost-cutting initiatives and changes to its organizational structure, aims to bring Danske's return on equity to between 9% and 10% in 2023.

Jensen considers 44-year-old Egeriis a "strong candidate" given his background from a large and complex bank such as Barclays PLC, which will compensate for his "lacking CEO experience." Egeriis worked in various roles for the U.K.-based lender from 2006 to 2017, most recently as its chief risk officer.

"Danske Bank has certainly found a skilled and highly competent substitute," Jensen said.

He also emphasized that ABN Amro's money-laundering case, which the bank settled with Dutch authorities for €480 million, is "a completely different case" to that of Danske Bank.

The Danish financial regulator has formally approved Egeriis for the new role, Danske Bank told Finans.