Newly Rich Spur Hiring Round at $340 Billion Nordic Wealth Shop
Newly Rich Spur Hiring Round at $340 Billion Nordic Wealth Shop
(Bloomberg) -- The $340 billion wealth management arm of Nordea Bank Abp is trying to keep up with the growing number of rich clients in Scandinavia.
Snorre Storset, who runs the unit from Oslo, says hiring more private bankers is key. It’s a decision that’s in stark contrast to developments in other departments, as Nordea moves ahead with 6,000 job cuts across the organization.
“We have invested in private banking, to accelerate the business momentum there, and we’re seeing the effects of that in terms of also getting more new money from new customers,” Storset said in an interview.
Shares in Nordea rose 1% on Thursday, putting it close to the top of Bloomberg’s index of European financial stocks.
Nordea is beefing up its ranks to capture a growing number of wealthy people in the Nordic region. Norway alone has almost as many high net worth individuals as Saudi Arabia and Kuwait. Sweden, with a population of just 10 million, has as many rich inhabitants as Mexico, which has roughly 130 million people.
Nordic investors have seen their fortunes take off after years of negative interest rates that have inflated the values of their homes and provided cheap funding for entrepreneurs. A lot of the newly rich are now looking for somewhere to invest.
Big Potential
“What we see in particular in Norway and Sweden is, there is big potential in general in private banking: They’re two of the fastest growing markets in Europe,” Storset said. “You have many successful entrepreneurs in Sweden who build big wealth relatively quickly, so it’s new money to a large extent.”
Storset has already hired about 25 new private bankers. He’s also managed to reverse outflows and says he’s expecting net inflows to continue. That’s key, as the kind of profit growth from rising markets that the asset management industry once enjoyed looks set to fade. Financial market gains were responsible for more than half of profit growth at private banks since 2013, raising questions about sustainability, according to a September report by McKinsey & Company.
Nordea reported net inflows into its wealth and asset management unit of 3.8 billion euros in the second quarter. That followed a 1-billion-euro inflow in the first quarter, which ended five straight quarters of outflows. Assets under management reached 306.5 billion euros.
Storset says the concept of private banking is only just taking off in Norway, the region’s richest economy and home to the world’s largest sovereign wealth fund. Just one-third of potential clients have a private banking relationship, with most investing in real estate or putting their money in deposit accounts, he said. Very few have diversified portfolios, so “we see that just by explaining what you can get, there’s a big potential in customers.”
Like other banks, Nordea has relied on asset management to make money after years of negative interest rates ate into income from traditional banking. And based on the amount of capital Nordea allocates, asset management stands out as its most profitable business unit.
What Bloomberg Intelligence Says:
“Nordea’s restructuring and downsizing of its Wholesale Bank is complete, but a return to positive lending and earnings growth, while evident, will be hampered by the industry’s revenue headwinds, in our view. Lower costs and benign credit charges should halt consensus’ EPS slide of about 30% over two years, but material upgrades aren’t likely.”
---- Philip Richards and Georgi Gunchev, bank analysts
Click here to view the research
Storset says Nordea is constantly monitoring its fee structure, after heightened regulatory scrutiny. Its main competitor in the Nordic region, Danske Bank A/S, recently fired a top executive after the lender was caught overcharging retail investors.
In an environment in which interest rates will be “low for longer, or low for forever,” Storset says “it means that we need to adapt fees to the level where we can create good value both for our customers and also for our shareholders.”
The bank also is targeting the U.S. for growth, after signing a deal in June with John Hancock Investment Management. Nordea will be a sub-advisor to a multi-asset absolute return fund starting at the end of August, ousting Aberdeen Standard Investments.
“This is milestone in that it really opens up the retail savings space for us,” Storset said. “Hopefully this will over time support our efforts on the institutional side.’
--With assistance from Kati Pohjanpalo.
To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net
To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net;Christian Wienberg at cwienberg@bloomberg.net
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