Nordics’ largest bank secures its position

Nordea wants to be the relationship bank of the future. In order to do that, it has had to meet the changing demands of its customers while delivering impressive returns


Nordea, the leading Nordic bank, aims to create a customer-focused organisation, built on sustainable profitability and efficiency, long-term relations, and a solid capital position. Its plan includes a focus on income, cost efficiency, capital efficiency and risk management, reflecting its ambition to stay in the top league of European banks.

Having taken early action during the financial crisis, Nordea has been awarded Best Banking Group, Nordics (Denmark, Norway & Sweden) by World Finance for the third year in a row.

We have, over the past years, been able to increase efficiency while supporting a growing number of customers

Christian Clausen, President and CEO of Nordea says: “We are proud to receive this recognition, which we see as a confirmation that we are on the right path towards the future relationship bank.

“To us, that’s a bank delivering a return well above cost of capital under the new regulatory regime, enabling us to continuously serve our customers and improve our offerings. We have not yet fully implemented our plan. But based on our stability, scale and diversified business model, we have, over the past years, been able to increase efficiency while supporting a growing number of customers, and ensuring a sustained contribution to the development and growth of the societies in which we operate.”

Gradual transformation
With 11 million customers, 29,000 employees and more than 1,000 branch office locations, Nordea is the market leader in the Nordics. Its business volumes and operating profit are more than twice the levels of its nearest competitor. Nordea’s strong position also means good access to funding: a confirmed AA rating from Moody’s and Fitch means it has some of the lowest funding costs of any bank in Europe.

Clausen says: “Through the financial crisis, both household and corporate customers benefited from Nordea’s size and stability. Going forward, our ambition is to stay in the top league of European banks. This means that we will continue to keep our costs flat as well as implement efficiency initiatives: for example, related to distribution and cash handling.”

By a gradual transformation of the branch network from traditional branches into professional and specialised advice locations where customers get advice about their financial situation, the bank can concentrate on adding value to each customer at a lower cost. As a consequence, adjusting manual cash locations to meet reduced demand continues: only half of all branch locations now offer manual cash services.

Future business platform
The transformation of the branch network is part of building a platform for the bank’s future business, combining increased efficiency with a consistently high level of customer service. Along with improved advisory capacity in branches, the services available through call centres, online banking and mobile banking have been expanded.

Recent technical advances and changes in customer behaviour have led to an explosion in the use of mobile banking. Nordea recently reached a milestone of one million active mobile bank users.

Clausen says: “As customers use their mobile phone to make their banking transactions, they tend to use our services more often: on average, once every two days. That means more frequent contact with our customers, and an opportunity to deepen the relationship and be a part of their everyday life.”

Nordea’s social media presence is another way of meeting customers’ demands for increased availability. The number of followers of Nordea’s Facebook pages has risen from 100,000 to 140,000 since year-end. Clausen says: “Social media has enabled us to keep a dialogue with our customers and get rapid feedback from them. The nature of the channel allows us to support customers with everyday matters regarding banking-related issues, every day of the year.”

Number one in large corporate banking
Capital efficiency is an important part of Nordea’s future financial plan. Nordea continues to develop capital-light products to meet customer needs while adhering to new banking regulations and attracting a growing share of ancillary business among corporate customers. Clausen says: “Our services for the largest companies were reorganised to enable us to help resolve any financial issue faced by our customers even faster.

“Our teams work across borders and business units to bring the best expertise the bank can offer to resolve any specific issue. We have maintained our market-leading position among the largest Nordic corporate customers, with significantly more lead customer relationships than any other Nordic bank.”

These efforts to meet the needs of corporate customers have paid off, and Nordea was
acknowledged as number-one in large corporate banking in Denmark, Finland, Sweden and the Nordics in the latest Greenwich survey.

Nordea continues to implement its relationship strategy in all customer segments. By striving to create great customer experiences, Nordea deepens its relationship with each customer and expands its customer base, growing overall business volumes. Nordea also has a continuous inflow of new customers: in the second quarter of 2013, the bank welcomed 23,000 new gold customers, and held 500,000 household and corporate meetings.

Customer focus also means continuous product range optimisation. In 2012, Nordea reduced its number of funds, and developed management and pricing models to sharpen its offerings and improve its performance. This process continued in the first part of 2013: six funds were consolidated, three funds closed and life products made more capital-efficient. The initiatives have contributed to strong investment returns, increased levels of service and an all-time-high level of assets under management.

The way forward
Clausen says: “We are very proud of what we have achieved, but humble in addressing future challenges. In order to maintain the position as one of the strongest banks in northern Europe, we must become even more efficient, increase profitability and maintain strong capital generation going forward. “We will take further action ahead to keep core tier 1 capital above 13 percent, in line with our new capital policy. We have set an ambitious financial target of a return on equity of 15 percent in a normalised interest rate environment and with a core tier 1 ratio above 13 percent.”

Clausen also points to the flat cost policy and risk management as important parts of Nordea’s financial plan. “Our prudent approach to risk – which has led to relatively small loan losses during the financial crisis – will be maintained and continue to guide us through an uncertain economic environment. Our financial stability is more important than ever to help people and companies with the financial tools they need to shape their own future. That is how we will fulfil our mission: making it possible.”