Nordea's $356 Billion Wealth Management Unit Is Hit by Outflows

(Bloomberg) -- The wealth management unit of Nordea Bank AB will struggle to reach a target of generating as much as 5 percent in net new money this year after a tough first half, according to its head, Snorre Storset.

“We have a long-term target of net flows with 4-5 percent growth from the start of the year,” Storset said in an interview in Oslo on Thursday. “It’s obvious this year that it will be difficult to reach that goal due to a good deal of outflows in the first half. But underlying, we have the same potential. So long-term, 4-5 percent is still realistic.”

Much of the lull in demand for Nordea’s wealth management services can be traced back to its Stable Return Fund. Launched in late 2005, the investment vehicle was offered in response to growing demand at the time for alternatives to traditional low risk investments.

Not so long ago, the Stable Return Fund was “so popular that we had to close it for new customers. We have opened it again. We have capacity now,” Storset said.

Nordea’s wealth business has 307 billion euros ($356 billion) in assets under management. In the second quarter, net fee and commission income at the unit fell 12 percent from a year earlier. Operating income was down 14 percent.

Storset says Nordea plans to rely more on private banking and “premium or affluent customers” for growth.

“Premium is a big customer group in the Nordics that we can do much more business with,” he said. “There’s a huge potential. There’s also big potential within life and pension, especially in Sweden.”

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