COPENHAGEN, July 18 - Danske Bank said on Wednesday it would forgo profits made from transactions in Estonia that are subject to a money laundering investigation and that its 2018 net profit would be at the low end of its target range.

Shares in Denmark's biggest lender have fallen 25 percent since March as allegations its Estonia branch was involved in money laundering between 2007 and 2015 intensified.

Its shares took another hit on Wednesday, plunging as much as 10 percent to a two-year low after it reported disappointing second-quarter earnings and was more precise about its full-year outlook. Shares were down 8.8 percent at 178 crowns at 1051 GMT.

On top of weak earnings, the stock was hit by investor concerns over next year's buybacks, as it was now "hopeless" to reach the 9.4 billion crowns forecasted by consensus, said ABG Sundal Collier analyst Mads Thinggaard.

The bank has admitted to flaws in its anti-money laundering controls in Estonia and has launched its own investigation into the allegations.

A newspaper report this month said Danske laundered up to $8.3 billion in Estonia in 2007-2015 - more than twice the amount initially reported by the newspaper.

Danske Bank said on Wednesday that it should not benefit financially from any "suspicious transactions" in Estonia.

"Consequently, it is Danske Bank's intention to make the gross income generated from such transactions in the period from 2007 to 2015 available for efforts that support the interest of the societies in which we operate, such as combating international financial crime," it said in a statement.

Gross profits from its non-resident portfolio in Estonia between 2007 and 2015 amounted to 1.5 billion Danish crowns ($234 million), but it was not clear how much of that amount Danske would waive, Chief Executive Thomas Borgen said.

"It is a complicated exercise, it is millions of transactions," Borgen told Reuters in an interview.

The bank is due to present the findings of its internal investigation in September.

It said it had hired Philippe Vollot as new chief compliance officer, replacing Anders Meinert Jorgensen who quit last week following an "intense" period.

Vollot will join by Dec. 1 from Deutsche Bank, where he headed the bank's global anti-financial crime and anti-money laundering efforts.

Earlier this month, Denmark's new business minister said Denmark's financial watchdog could open a new investigation as the bank's own investigation might not be enough.

"I completely agree with Danske Bank that the bank can't keep that money. Good that they recognise this," business minister Rasmus Jarlov said on Twitter on Wednesday.

TRADING INCOME SLUMPS

The Danish financial watchdog said in May that returns on allocated capital at Danske's Estonian non-resident portfolio of around 400 percent in 2013 should have raised red flags. It ordered the bank to set aside an additional 5 billion crowns in regulatory capital in response to laundering allegations.

The potential fine Danske Bank could face depends on whether the U.S. regulators take action. While the bank doesn't have a banking license in the United States, it has a bond programme in dollars, which could prompt U.S. regulators to open a case.

For now, analysts on average put estimates for potential fines at roughly 4 billion crowns.

Danske Bank reported a pretax profit of 5.49 billion crowns for the three months to June 30, down from 6.18 billion a year earlier. Analysts had forecast a profit of 6.02 billion.

The bank said it still expects a net profit for the year of between 18 and 20 billion crowns, but that it would likely be at the lower end of that range due to weaker trading income.

($1 = 6.4039 Danish crowns)

(Reporting by Jacob Gronholt-Pedersen and Stine Jacobsen; editing by Emelia Sithole-Matarise and Susan Fenton) ((jacob.pedersen@thomsonreuters.com; +45 3396 9673; Reuters Messaging: jacob.pedersen.thomsonreuters.com@reuters.net))