Nordea Plans More Job Cuts as Profit Rises 7% in Fourth Quarter

Nordea Bank AB Chief Executive Officer Christian Clausen signaled he still needs to cut as many as 940 more jobs at Scandinavia’s biggest lender to reach a goal of lowering headcount by at least 10 percent.

“We have reduced our staff by 8 percent, we have come far,” Clausen said in an interview with Bloomberg Television’s Francine Lacqua today. “From now on it’s more like becoming more efficient and thereby reducing staff where it’s possible. The number of manual transactions is going down. Our customers are using the Internet.”

Clausen said in December he needs to cut jobs to help the bank meet stricter regulatory requirements. Nordea, which is lagging behind its Swedish rivals Svenska Handelsbanken AB and Swedbank AB in boosting capital buffers, said it managed to increase profit last quarter even as demand for banking services was “constrained” by a tough economic climate.

Nordea’s net income in the fourth quarter rose 7 percent after it booked 18 percent more in income from fees and commissions to its clients. Profit for the period reached 840 million euros ($1.13 billion), also after loan losses slipped 7 percent, the bank said.

The number of full-time employees at the bank dropped to 31,466 in the fourth quarter from 33,068 a year earlier, according to today’s report. “We will continue to increase cost efficiency by approximately 3 percent annually in order to largely maintain flat costs going forward,” the bank said.

Shares Gain

Nordea’s total operating costs slipped 0.6 percent in 2012 from the year earlier, it said.

Shares in the bank rose as much as 3.7 percent and traded 2.4 percent higher at 67.95 as of 10:29 a.m. in Stockholm. The stock has advanced 9.4 percent this year, compared with a 10 percent increase in the 38-member Bloomberg index of European financial companies.

Nordea plans to “reduce staff by about 2 to 3 percent more in the coming two to three years,” Clausen said. “Distribution is changing because customers are changing behavior.”

The bank repeated its dividend policy and will pay out 44 percent of profit to shareholders. Swedish rival Swedbank, the second-best capitalized major lender in the European Union as of the third quarter, today raised its dividend payout ratio to 75 percent from 50 percent.

Nordea reported a core Tier 1 capital ratio -- a measure of financial strength -- of 13.1 percent of its risk-weighted assets for the end of 2012, up from 12.2 percent at the end of September. Swedbank’s core Tier 1 ratio was 17.4 percent.

Capital Buffers

Both exceeded the 10 percent minimum requirement that Sweden’s biggest banks will need to meet this year and also topped the 12 percent floor that becomes effective in 2015.

Nordea said it targets a core Tier 1 capital ratio above 13 percent and a return on equity of 15 percent, under normal interest rate conditions, by no later than by Jan. 1, 2015.

The bank’s core Tier 1 capital ratio will probably remain above 13 percent in coming years, including the effects of regulatory changes, it said. Any excess capital will be distributed to shareholders, also in the future, it said.

Nordea needs to meet higher capital standards in Sweden than those set elsewhere as the government of Prime Minister Fredrik Reinfeldt pledges to protect taxpayers from bank-industry losses. Clausen, who is also the president of the European Banking Federation, has bemoaned the impact he says tougher bank rules are having on growth.

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