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Nordea CEO Says He's `Not Satisfied' With Income Development

Nordea CEO Says He's `Not Satisfied' With Revenue Development

(Bloomberg) -- Nordea Bank Abp reported profit for the third quarter that fell short of analysts’ expectations as the Nordic region’s biggest lender characterized the period as “challenging” and said it wasn’t satisfied with the development in its top line.

Net income fell 18 percent to 684 million euros ($785 million) in the three months through September, Nordea said on Wednesday. That missed the 717 million-euro estimate provided by analysts. Shares in the bank opened more than 3 percent lower in Stockholm, where the bulk of the stock is traded, and were down about 1.5 percent as of 9:17 a.m. in the Swedish capital.

Nordea CEO Says He's `Not Satisfied' With Income Development

Simon Madsen, an analyst at Jyske Bank, said “the major disappointment is in fees and trading, where the wholesale banking division is experiencing issues from seasonality, low customer activity and intense competition.” But on costs, the bank is “delivering,” he said.

Click here for a full overview of Nordea’s 3Q numbers

Chief Executive Officer Casper von Koskull described the third quarter as “challenging.”

“We are not satisfied with the revenue development,” he said.

While net interest income was “stable,” von Koskull said “fees and commission and specifically net fair value were weak, mainly due to difficult market conditions and lower corporate activity.”

Still, management was pleased with Nordea’s performance on costs and credit quality, and von Koskull described capital ratios as being at “an all-time high.”

In an interview with Bloomberg Television, von Koskull said the third-quarter is traditionally weaker for Nordea and that he feels the bank is still well positioned to benefit from all the efforts made to cut costs and improve efficiency.

Moving Headquarters

This month, Nordea moved its headquarters out of Stockholm and into the euro zone, becoming the European banking union’s eighth global systemically important bank. From its new base in Helsinki, Nordea says it anticipates a more predictable regulatory environment allowing it to better manage costs.

Its efforts to save money have led Nordea further down the path toward automation than most, and von Koskull is in the process of cutting 6,000 jobs to create a more digital bank. That’s in addition to selling assets in Luxembourg, the Baltics and Russia, as part of efforts to reduce risk. The CEO said on Wednesday that Nordea is ahead of target on its plan to cut jobs and that he sees no need to adjust the program of reductions.

Money Laundering

Meanwhile, Nordea is dealing with allegations that its operations were used to launder money in a case that is linked to the Danske Bank A/S scandal and spanning the years 2007 to 2015. Nordea says it is aware of its “historical shortcomings in the anti-money laundering space” but that it doesn’t expect allegations against it to match those targeting Danske.

Browder Raises Nordea Laundromat Allegations to $405 Million

Von Koskull said he hasn’t seen the full list of allegations made by Hermitage Capital CEO Bill Browder, who says Nordea was probably used to launder just over $400 million.

Asked whether there’s any risk that figure might grow, von Koskull said “I see nothing in our business that would indicate that.”

Danske Bank, Denmark’s biggest lender, is under investigation in several jurisdictions, including the U.S., after admitting that a large part of about $230 billion that flowed through a tiny Estonian unit may need to be treated as suspicious transactions.

Nordea reiterated that it is “responding to inquiries from U.S. governmental authorities regarding historical compliance with certain U.S. financial sanctions during 2008–2014,” in Wednesday’s report. “The outcome of some investigations is pending and it cannot be excluded that these investigations could lead to criticism or sanctions.”

Von Koskull said he is “very comfortable where we stand and what we’ve done” to fight suspicious financial transactions.

But in general, “when you look back in history, the whole industry I think underestimated the complexity of the issues,” he said.

--With assistance from Kati Pohjanpalo, Niklas Magnusson, Veronica Ek, Manus Cranny and Nejra Cehic.

To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net

To contact the editor responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net

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