(Bloomberg) -- Danske Bank A/S’s money-laundering scandal threatens to undermine its growth engine.

The lender’s Nordic banking operation, which encompasses Norway, Sweden and Finland, was the only core unit of five to report higher profit in the third quarter. But now, some customers in the biggest Nordic economy may be reconsidering their loyalty to the bank, according to Berit Behring, head of Swedish operations at Danske.

The Nordic business plan was a brainchild of former Chief Executive Officer Thomas Borgen, who wanted to make expansion in the region a cornerstone of Danske’s overall growth strategy. As recently as November, Danske proudly pointed to a 13 percent increase in lending in the Swedish retail market in the first nine months of last year.

But Behring says clients are now expressing concerns as they await the outcome of multiple criminal investigations into Danske amid a $230 billion dirty money scandal. The result of those probes may determine how willing clients are to stick with the bank, she said in an interview in Stockholm.

“Unfortunately it has damaged the confidence in the market for us even here in Sweden,” Behring said. What’s more, the scandal has triggered a cut in Danske’s sustainability ratings, which has “affected behavior” among institutional clients that make decisions based on those ratings, she said.

Waiting for Details

Behring declined to elaborate, and said markets will have to wait until Danske reports its fourth-quarter results on Feb. 1 to learn more.

Danske has admitted that vast amounts of money from suspicious clients in the former Soviet republics flowed through a branch in Estonia and into the West until as recently as 2015. The U.S. Justice Department is investigating the case, while Danish authorities have already brought preliminary charges against the bank. In Estonia, 10 former Danske employees have been apprehended.

The bank said on Friday that it may again become the subject of a formal probe in France, where authorities are reconsidering its assisted-witness status amid allegations of lying made by Bill Browder, the co-founder of Hermitage Capital Management and a driving force behind criminal money laundering complaints against banks. Danske said it’s been summoned to an interview by the investigating judge in the case.

Read more: Danske Resumes Bond Sales Upended by Laundering Allegations

Analyst estimates for fines range from below $1 billion to more than $8 billion. Meanwhile, the bank is still looking for a permanent CEO to replace Borgen, after he was removed in October for his role in the laundering scandal.

Against that backdrop, investors are wondering how well Danske’s basic operations will fare, so the notion that its Nordic banking business might be affected comes at a particularly bad time.

Danske also has to deal with the same turbulent markets that all other banks are struggling with. It cut its 2018 forecast last month, pointing to volatile financial markets. Economic growth in Sweden is slowing as well, while Brexit has brought new competition to Sweden as many London-based banks make Stockholm their Nordic hub.

Sweden is “the Nordic market where we have the largest domestic banks, but we also have most international banks here,” Behring said. “We see a tendency right now, with Brexit coming up, that more of the international banks are moving more staff into Stockholm, and they chose Stockholm as their headquarters in the Nordics."

Market Share

Investors and analysts will be scrutinizing Danske’s fourth-quarter results for any traces of weakness in its important Nordic operations. The bank has taught the market to focus on the business area, after highlighting its expansion in Sweden and Norway in recent quarters.

Annual growth in Danske’s Swedish business averages just under 10 percent, Behring said. The bank has increased its share of lending in the country to 5.8 percent, the highest in more than eight years. Its market share in Norway is 5.9 percent.

Ultimately, Behring said she thinks Danske will keep its momentum in Sweden. The bank’s efforts to be transparent with regard to the laundering case and update customers via its website have restored some confidence, she said.

Behring says history is a good guide in terms of how Danske copes with headwinds. During the 2008 financial crisis, the bank “went through a tough time,” but in Sweden, the upshot was that that business saw little more than a “flattening out,” after which “we took off again,” she said.

“I don’t say that we need to flatten out this time, because I don’t think we will have to do that,” Behring said. “But the message is that we have every year moved a little bit more forward and we will continue to do that.”

To contact the reporters on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net;Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Patrick Henry

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