Nordea Managers of $350 Billion Shielded From Deep Job Cuts

(Bloomberg) -- As regular bankers at Nordea Bank Abp brace for yet another round of cuts, those lucky enough to be working in wealth management face a very different future.

The head of Nordea’s wealth unit, Snorre Storset, says a plan to cut jobs across the organization won’t affect portfolio managers in his unit. Storset, who oversees $350 billion in assets from Oslo, pointed to a boom in private banking in Norway and Sweden. “We’re hiring,” he told Bloomberg. That’s because the two countries are home to “the fastest growing private banking markets in Europe.”

After years of negative interest rates and tougher bank regulatory requirements, wealth management is emerging as the golden egg for a financial industry still struggling to find its feet. At Nordea, Chief Executive Officer Frank Vang-Jensen used last week to make clear to his employees just how dire things are in most corners of the bank. He was brought in last month to clean up after years of restructuring failed to control costs or revive revenue.

The upshot is that employees across most corners of Nordea have now been told to gird for “significant” job cuts that will add to the 6,000 already under way. Some of the hardest-hit areas will include Nordea’s wholesale banking unit, which will suffer deep reductions in allocated capital after years of underperformance.

Investors said they welcomed the new management’s message, with several analysts raising their price targets. But some also tempered their enthusiasm. “Buzzword’s are nice, but we need delivery,” Handelsbanken said in a client note.

Meanwhile, the wealth unit is figuring out how best to grow. Most of it will be organic, but there’s room for acquisitions and joint ventures, according to Storset. Vang-Jensen says that wealth management stands out as a business that’s “very profitable to us.” And according to Storset, the unit has had little trouble defending the prices it charges. “As long as we have such good returns, we are also able to earn decent money,” he said.

Over the past year, Nordea’s asset-management staff numbers have grown by 8%, while most other units at the bank appear to have either stopped hiring or to have cut jobs, according to data in its third-quarter report.

There’s a growing demand for money management services in a region that’s experienced some of the world’s lowest interest rates, and lived with them longer than most other places. In Denmark, rates have been negative since 2012. Swedish rates have been below zero since 2015. That’s left people richer as it’s driven up the value of their homes. It’s also made them more inclined to seek out alternatives to regular deposit accounts that, in some cases, have started charging negative rates.

Storset also said he sees potential for Nordea to expand its wealth offerings beyond the Nordic region. A June agreement to act as a sub-advisor with John Hancock Investment Management resulted in the first inflows: 600 million euros, or 16% of net inflows in the third quarter. Storset said he will leverage that deal to further boost growth, particularly among the country’s largest institutional clients.

The U.S. as a Home Market

“Now we are adding capacity because we feel that now, we can build it into a home market in our way of thinking in the longer term,” Storset said.

Part of the goal is to push products that cater to clients with an appetite for investment products that live up to higher ethical standards, with Nordic asset managers having a reputation as market leaders in the field, according to Storset.

In the third quarter, Nordea saw net inflows at its wealth unit of 3.7 billion euros ($4.1 billion) from a year earlier. Most of that increase came from institutional sales.

To contact the reporters on this story: Frances Schwartzkopff in Copenhagen at fschwartzko1@bloomberg.net;Jonas Cho Walsgard in Oslo at jchowalsgard@bloomberg.net;Rafaela Lindeberg in Stockholm at rlindeberg@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net;Kati Pohjanpalo at kpohjanpalo@bloomberg.net

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