(Bloomberg) -- Nordea Bank AB sank in Stockholm trading as the biggest Nordic lender announced additional costs to cover at least 6,000 job cuts needed to stay competitive.
The bank said about 2,000 of those will be consultants. Nordea will need to take a “transformation cost” of as much as 150 million euros ($177 million) in the fourth quarter, to help deal with the cuts, Chief Executive Officer Casper von Koskull said in a statement on Thursday. The 4,000 non-consultant jobs represent about 13 percent of Nordea’s workforce.
The bank, which also reported third-quarter results on Thursday that missed analyst estimates, traded as much as 5.9 percent lower in Stockholm, making it the day’s worst performer in the Bloomberg index of European financial stocks, after Barclays Plc.
“Delays in Nordea’s cost-savings program, revenue weakness from stagnant lending and a drop in fee income, along with no capital progression, paint a bleak picture through 2018,” Bloomberg Intelligence analysts Philip Richards and Georgi Gunchev said in a report. The bank was also criticized by analysts on a conference call for surprising the market with the extra costs tied to the job cuts.
In an interview with Bloomberg Television’s Manus Cranny, von Koskull said the cuts reflect an evolution across the industry as banks rely more on digital services. “This is creating, in my mind, the future bank and these cuts are the result of that, and I think this is something you will see in the whole industry going forward,” he said. The cuts will be spread across the bank in all markets, he said.
The financial services union in Denmark called the scale of the planned job cuts “shocking.” The step “betrays an intense focus on shareholders,” Kent Petersen, the union’s head, said in an emailed statement. The firings will mostly affect information technology jobs and people working in the retail operations of the bank, “so as far as one can judge, by shutting more branches,” Petersen said.
Over the coming four years, Nordea will book what it calls transformation costs and, “in order to make this shift as efficient and transparent as possible,” will report these as running costs, the bank said. Next year, Nordea expects a total cost base, including transformation costs, of about 4.9 billion euros, which is then seen “gradually” falling to less than 4.8 billion euros in 2021, it said.
Nordea said last month it will move its headquarters to Helsinki from Stockholm, after complaining about Sweden’s strict regulatory environment. The decision means the Nordic region’s only global systemically important lender will fall under the supervision of the European Central Bank.
Read more: Angry Nordea Clients Force Bank Downgrades Ahead of Earnings
Nordea now faces a backlash from Swedish clients seemingly angered by its move, as mortgage brokers in the country point to a mass exodus from the bank to its competitors.
Von Koskull said the bank isn’t seeing any clear fallout yet. “The inflow of deposits in Sweden is unchanged in terms of the trend,” he told Bloomberg Television. Nordea has seen a net inflow of mortgages in the third quarter, “so in the numbers I don’t see it,” he said.
Management targets completing the relocation in the second half of next year. Since converting its subsidiaries across the region into branches this year, a shift in headquarters means all Nordea’s cross-border operations will be overseen by the supervisor of the country in which its based.
Nordea’s 3Q Figures:
- Net interest income rose 1 percent to 1.19 billion euros, vs estimated 1.20 billion euros
- Net fee and commission income rose 2 percent to 814 million euros, vs estimated 844 million euros
- Net loan losses dropped 41 percent to 79 million euros, vs estimate of 112 million euros
- Net income fell 7 percent to 828 million euros vs estimate 844 million euros
- Diluted EPS was 0.21 euros, vs 0.22 euro a year earlier
- CET1, excluding Basel I floor, was 19.2 percent, unchanged from the previous quarter and up from 17.9 percent a year earlier
- Cost-to-income ratio was 51, versus 48 a year earlier
- Nordea employed 31,500 people at the end of September, excluding consultants
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