Nordea’s 6,000 Job Cuts Not Enough as Bank Chases More Savings

(Bloomberg) -- Less than two years after announcing 6,000 job cuts, Nordea Bank Abp Chief Executive Officer Casper von Koskull is making clear that redundancies need to continue if the lender is to achieve its goals.

Von Koskull says Nordea is unlikely to announce another big round of firings, but warns that constant attrition is the new normal.

In an interview on Thursday, the Nordea CEO said the bank needs to “accelerate the structural cost savings” as well as income growth.

Von Koskull, who recently announced that he plans to step down next year when he turns 60, has repeatedly said he thinks the financial industry is over-staffed. “This is an industry that will have less people,” he said on Thursday. To stay profitable, banks need to be “much more digital, much more automated,” he said.

Von Koskull underscored his awareness that the process is a delicate one in which management needs to avoid making cuts that demotivate staff and undermine the bank’s ability to perform. For that reason, he wants to avoid what he calls the “distractions” of announcements such as the 18,000 job cuts recently unveiled by Deutsche Bank AG.

“We will do it step by step,” von Koskull said. “You should do it on a continuous basis.”

Nordea is fighting to regain the confidence of its investors amid signs that von Koskull’s bold experiment is stalling. He’s hardly brought down costs, while revenue has started to slide. He has made a name for himself in the industry as someone keen to automate as many functions as possible as he predicts that banks, in roughly a decade, will only employ half as many people as they do now. Von Koskull warns that all banks will need to adjust if they’re to stay profitable.

Nordea is under a lot of pressure from investors to improve revenue after years of focusing on cost cuts. That means von Koskull needs his bankers to be motivated, and he’s made employee engagement one of four key initiatives to drive business momentum. Any big announcement on cuts could threaten the morale of Nordea’s roughly 30,000 remaining staff.

Click here for more on Nordea’s second-quarter results

“You need to synchronize your cost drive with making sure you can maintain income momentum,” von Koskull said. “And that’s what we will do.”

But, “If we can take more cuts faster, we’ll do it,” he said.

Nordea, which is the biggest Nordic bank by assets, is also reviewing how much it can afford to pay out to shareholders. Low interest rates and a tougher regulatory environment, as it awaits new capital requirements from the European Central Bank, will all weigh on its finances. The bank plans to provide an update to the market when it publishes third-quarter results.

To contact the reporter on this story: Kati Pohjanpalo in Helsinki at kpohjanpalo@bloomberg.net

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

©2019 Bloomberg L.P.