Nordea CEO Hits Back at ‘Impatient’ Critics With Revenue Message

(Bloomberg) -- As investors sound the alarm over declining revenue and profits, Nordea Bank Abp Chief Executive Officer Casper von Koskull says they’re about to see a turnaround this year.

“When I look at 2019, my clear ambition is that we have growing income and reduced costs,” he said in an interview in Helsinki on Friday. “Markets are always impatient.”

Von Koskull pointed to asset management as a key business area where Nordea is poised for a rebound in 2019.

Nordea CEO Hits Back at ‘Impatient’ Critics With Revenue Message

“The starting point is that we need to get our own market position back on track, because we’ve been below that,” von Koskull said. “There’s a lot of business momentum, a lot of it is just getting the machine back and doing what we are good at.”

The CEO underscored his enthusiasm about Nordea’s prospects by buying shares worth about $2 million, according to a regulatory filing published on Monday. Shares in the bank traded about 1 percent higher at 85.60 kronor after the market opened in Stockholm, outperforming Bloomberg’s index of European financial stocks.

Nordea has spent years cutting costs, axing jobs and automating as much as possible to turn itself into a much leaner, nimbler organization. But its fourth-quarter results were met with dismay by some of the bank’s most prominent shareholders, who were angered by what they characterized as a lack of sufficient progress.

Cevian, an activist investor that late last year bought its way onto the nomination board that proposes members for Nordea’s board, said profits were “way too low.” Sampo, which holds about a fifth of the bank’s stock, complained that “Nordea has some key performance indicators that don’t meet its Nordic peers.”

Nordea CEO Hits Back at ‘Impatient’ Critics With Revenue Message

Nordea has been so consumed by its cost cuts, divesting risky assets, dealing with compliance requirements and moving its headquarters into the euro zone, that the organization arguably hasn’t focused enough on the top line, von Koskull said.

But the CEO of the biggest Nordic bank points out that Nordea now has plenty of room to grow in areas such as private banking in Norway and Sweden, where “we are under-represented relative to what we could do.” He also says he sees potential in the life and pension insurance businesses, as well as asset management, where products and capabilities are “in place” and “it doesn’t need magic” to resume growth.

Asset Management

“There are two areas where 2018 was particularly difficult: one was asset management and savings, and the other one was Markets, both are areas where we are traditionally very strong,” von Koskull said.

He says Nordea is now working on “new alliances” in Asia and in Western nations that involve distribution agreements in asset management. “We will distribute their products and they will distribute our products, so we will get more products,” he said.

“I’m convinced we can get the asset management that has been shrinking,” von Koskull said. “We will get that back, now we have a new starting point. We have the products, the capabilities in place. It doesn’t need magic to get that back.”

Capital Burden

According to von Koskull, one reason why Nordea has a lower return on equity than its Swedish peers is that it operates “with a lot more capital.”

“While we have shrunk the bank a little bit by divesting businesses, de-risking businesses,” and focusing more on core operations in the Nordics, “at the same time our absolute and relative capital has just continued to go up,” he said.

One of the main reasons Nordea moved its headquarters to Helsinki from Stockholm last year was to be inside the European banking union, where management was betting on getting a more level playing field. Von Koskull says that hasn’t quite happened yet, but when it does, the expectation is that the bank’s capital burden will be more manageable, in relative terms.

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