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Nordea unveils new strategy to boost performance following Q3 loss

Nordea Bank Abp's new CEO, Frank Vang-Jensen, unveiled a new strategy along with third-quarter earnings that will see it cut costs and take measures to drive performance.

The bank reported a loss of €332 million for the third quarter, compared to a profit of €724 million a year previously.

"Our financial performance has not been where it should be for some time," Vang-Jensen said during the Oct. 24 call. "The new plan will significantly improve our operating performance."

Vang-Jensen took over as CEO from Casper von Koskull in September.

Targets

The new strategy, which Nordea will elaborate on at its Oct. 25 capital markets day, aims to bring a return on equity to above 10% in 2022 and to reach a cost-to-income ratio of 50% in 2020. The bank is also hoping to bring its cost base below €4.7 billion in 2020, with ongoing cost reductions after that.

The bank's cost-to-income ratio stood at 58% at the end of the third quarter.

Nordea will look to boost performance through a mixture of organic growth and M&A, Vang-Jensen said. It will consider bolt-on acquisitions similar to Gjensidige Bank ASA, a Norwegian lender it bought in the first half of 2019.

Any excess capital will be distributed back to shareholders, with share buybacks as a tool for this, he added.

The new strategy will help the bank to regain "lost ground" in terms of market share, Vang-Jensen said.

Job cuts

The bank expects to cut jobs as part of cost-cutting efforts in its new strategy. As a result, it has included a restructuring provision of €204 million for the third quarter to cover redundancies and other expenses.

In total, the bank racked up one-off charges totaling €1.3 billion during the quarter. This includes IT intangibles totaling €735 million and losses relating to the sale of shares in Luminor Group AB. The bank has also made loan loss provisions of €229 million, following discussions with the European Central Bank, reflecting the subdued outlook for certain sectors of the economy.

The bank's loan losses during the quarter totaled €49 million, which the bank said was mainly due to the offshore sector.

The quarter has been "special" due to the unusual number of one-off expenses, Vang-Jensen said.