Photographer: Tomi Setala/Bloomberg
Why Cutting 6,000 Bank Jobs May Be Good for BusinessBy
One week after Nordea Bank AB said it will cut 6,000 jobs in a digital bet, a key investor says the rest of the industry would do well to watch and learn.
Sampo Oyj, Nordea’s biggest owner with about one-fifth of its stock, says digital adequacy is overtaking capital adequacy as a top consideration for investors.
“In the Nordics, it’s a race against time more than against capital,” Sampo Chief Executive Officer Kari Stadigh said in an interview in Helsinki on Thursday. “Those who started early on, and do it in a more determined-enough way, they are going to get the clear distinction” and “also client satisfaction,” he said.
It’s a realization that’s hitting an industry already reeling from hundreds of thousands of job losses since the global financial crisis of 2008. But banks now need to lose many more people to stay competitive, according to Casper von Koskull, the CEO of Nordea. In an interview last month, he said it was conceivable that banks might have only half as many employees in about 10 years as today.
Nordea isn’t alone in getting rid of humans to make way for robots. National Australia Bank Ltd. said this month it will eliminate 4,000 jobs in the face of technological advances. Former Citigroup Inc. Chief Executive Officer Vikram Pandit said in September that about 30 percent of banking jobs could vanish in the next five years.
The transition isn’t cheap and Nordea suffered a market pummeling the day it announced its job cuts, and the associated transition costs. Stadigh, speaking on an investor call, said the selloff reflected a misunderstanding in the market of how Nordea is handling the costs. He also said Nordea could have communicated the transition a bit better.
The investment into becoming a digital bank will drive scale benefits, Stadigh said. And that in turn pushes down unit costs.
“Only high profitability allows you to do these investments,” Stadigh said. “We’re going to see a big discrepancy, for instance, between central European banks and Nordic banks, because the central European banks can’t afford to do these investments.”