Nordea CEO defends 'shocking' 6,000 job cuts as bank analysts complain

Nordea operates in a part of the world where customers have shown a willingness to accept less human contact as chatbots and online services proliferate.
Nordea operates in a part of the world where customers have shown a willingness to accept less human contact as chatbots and online services proliferate.PHOTO: EPA-EFE

COPENHAGEN (BLOOMBERG) - Nordea Bank is again on the defensive as 6,000 job cuts - and their cost - surprise and anger everyone from unions to investors and analysts.

Denmark's financial workers union called the decision to lose well over a tenth of Nordea's workforce "shocking." Finland's bank union said the move was "brutal."

Analysts on a conference call challenged the credibility of management's cost guidance, and investors sent Nordea shares down almost 7 per cent at one point on Thursday (Oct 26), making it among the day's worst performers on Bloomberg's index of European financial stocks. The shares opened little changed on Friday.

But chief executive officer Casper von Koskull says it should have been clear to those watching the bank closely that such a step was inevitable.

Responding to criticism from analysts that the announcement came out of the blue, von Koskull said bringing about a digital "transformation" without such costs "would be unheard of."

Still, "maybe I'll take that on board, that maybe one should have" signaled costs could rise, he said in an interview. "But the more you flag earlier, the more they want to know the fact there and then."

Analysts suggest that Nordea had simply guided them in the wrong direction.

"Nordea made a big fanfare around its cost-reduction and group transformation plans, so to now announce a three-year delay to that is a setback," Bloomberg Intelligence analyst Philip Richards said in an email. "Repositioning for the digital era is necessary for all banks, but needs to be combined with financial benefits rather than dragging on earnings."

Nordea, which is already on the defensive in Sweden after announcing it will redomicile to Finland for regulatory reasons, has long signaled it wants to be ahead of its competitors when it comes to providing digital solutions. It also operates in a part of the world where customers have shown a willingness to accept less human contact as chatbots and online services proliferate.

Von Koskull predicts that other banks will soon follow Nordea's lead, and paints a vision of a financial industry with far fewer bankers. "This is something you will see in the whole industry going forward," he said.

Ultimately, Nordea's transition to a world with fewer humans will reduce its costs, according to von Koskull.

But "Maybe there has been a disconnect in terms of really understanding what transformation means," von Koskull said. "What analysts have difficulty modeling is your core competencies, when you actually do a transformation, and what sort of a digital bank you are building."

"That, I fully accept, is difficult to model," von Koskull said. "But I am very comfortable with the way it positions this bank going forward."