Danske Bank May Cut 1,500 Danish Jobs Through Attrition
Danske Bank May Cut 1,500 Danish Jobs Through Attrition
Chris Ratcliffe/Bloomberg
Danske Bank, which also has units in Ireland, Sweden, Norway and Finland, has cut 2,000 jobs at the group level in the last two years.
Danske Bank, which also has units in Ireland, Sweden, Norway and Finland, has cut 2,000 jobs at the group level in the last two years. Photographer: Chris Ratcliffe/Bloomberg
Danske Bank A/S may cut more jobs and lift prices as Denmark’s biggest lender faces a weak domestic economy, a local banking crisis and low interest rates, said Tonny Thierry Andersen, the head of the Danish retail unit.
Danske, the worst performer of the Nordic region’s six biggest lenders, could cut as many as 1,500 jobs through attrition as 25 percent of its Danish retail banking staff retires in the next seven years, Chief Executive Officer Andersen said.
That would leave “space to manage the cost issue,” Andersen, 47, said in an interview in Copenhagen after speaking at the Danish Board Institute. “It may be necessary in the future, I will not rule out that option.”
International investors have avoided Danish banks after two regional lenders collapsed this year, triggering senior creditor losses under the country’s bail-in resolution laws. Denmark’s smallest banks have lost access to international funding, while Danske and the country’s other biggest banks, which the Danish financial regulator has said are not at risk, are paying a premium.
Danske Bank shares slumped as much as 4.9 percent and were trading 4 percent lower at 66.30 kroner as of 11:16 a.m. in Copenhagen.
Nordic Cuts
Danske, which also has units in Ireland, Sweden, Norway and Finland, has cut 2,000 jobs at the group level in the last two years. Stockholm-based Nordea Bank AB (NDA), the Nordic region’s biggest lender, last month said it will cut 2,000 jobs, including as many as 600 in Denmark, to boost profits.
Jyske Bank A/S, Denmark’s second-biggest lender, said today it will cut 250 jobs and close branches to save 400 million kroner ($72.8 million) annually by 2013. Spar Nord Bank A/S, Denmark’s fourth-largest listed lender, will cut 50 jobs by the end of the year, Chief Executive Officer Lasse Nyby said in a phone interview today.
Danske has a 30 percent market share in Denmark, and its Danish retail unit employs 6,000 of the bank’s 21,500 staff. The division has a 950 billion-krone balance sheet and reported a 1.11 billion-krone profit before tax in the second quarter.
In a “normal environment” with short-term interest rates at about 3 percent, the unit’s profit before tax should be at least twice as high, Andersen said. The bank yesterday raised its lending rate by as much as half a percentage point. Jyske Bank said today it will also raise lending rates by the same amount.
Higher Margins
Denmark’s central bank, whose sole mandate is to peg the krone to the euro, has lowered its interest rate on certificates of deposit twice in the past month to weaken the Danish currency. The CD rate is now at 1 percent, compared with an average of 3.99 percent over last 20 years. The benchmark lending rate is at 1.55 percent, compared with an average of 4.03 percent over the past two decades.
“There’s a much bigger chance clients will have to pay higher margins,” Andersen said. “Otherwise the banks will become anemic and won’t lend enough to underpin economic growth.”
Denmark is Scandinavia’s worst-performing economy after a burst housing bubble choked consumer spending. Gross domestic product will expand 1.4 percent this year, the central bank said this week. Sweden’s economy will surge 4.5 percent and Norway’s mainland output will grow 3 percent, according to the countries’ central banks. The economies of Denmark and the euro area will be subdued for “three to five years,” Andersen said.
Economic Impact
Shares in Danske have slumped 50 percent this year. Oslo- based DnB NOR ASA (DNBNOR) has lost 30 percent in the same period, while Nordea’s stock retreated 29 percent. Stockholm-based lenders SEB AB, Svenska Handelsbanken AB (SHBA) and Swedbank AB (SWEDA) have lost 39 percent, 25 percent and 24 percent respectively this year.
Danske’s funding costs have risen 60 basis points in the past two months as Europe’s debt crisis deepened, adding to the fallout of Denmark’s local banking crisis, Andersen said. Danske and other big Nordic banks have been able to tap funding markets amid the debt crisis because of their “good names,” he said.
Money markets “need only get a bit worse before it will have a material impact on the real economy,” Andersen said.
“The worst that can happen is if Greece is not handled properly,” he said. “We will be hit by a domino effect if Greek banks fall from the impact on German and French banks and those economies.”
To contact the reporter on this story: Peter Levring at plevring1@bloomberg.net
To contact the editor responsible for this story: Tasneem Brogger at tbrogger@bloomberg.net; Andrew Rummer at arummer@bloomberg.net
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