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Nordea’s ‘new normal’ means fewer staff and smaller bonuses

Bonuses may have risen marginally in the past three months, but the clear message from Nordea as it posted its latest quarterly figures today is that performance-related pay is likely to remain reined in for the foreseeable future.

Unveiling Q3 and January-September figures, president and chief executive Christian Clausen stressed there would be a continued emphasis on increasing capital efficiency and that “we will ensure a largely flat cost development”.

Moreover, the impact of the new regulatory regime and Basel III capital adequacy standards will have an ongoing effect on the bottom line of Nordic banks, in Nordea’s case costing an extra €400m a year compared to pre-crisis levels.

“The impact on the cost of operating banks will grow further which will be reflected in business models and other changes in the global banking market for years to come,” warned Clausen.

For today, however, the latest figures showed staff costs in the quarter rising 19% to €887m compared with Q2 and ahead 23% against the same quarter last year.

But a large proportion of this was restructuring costs which, when stripped out, meant staff costs were down 1% quarter-on-quarter to €739m, with the number of employees decreasing by 1% to stand at 33,844, though this was still ahead of the 33,683 reported at the end of the same quarter last year.

The only positive note was that provisions for performance-related salaries in the third quarter were up marginally, to €49m, compared with €45m the previous quarter.

For the nine months to September, staff costs as a whole were up 14%, the bank added, though again were more muted once restructuring costs were stripped out, rising 4%.

The bank reiterated its announcement from the summer that it is to shed some 2,000 employees during this year and 2012 as it moved to a new leaner structure somewhat ominously entitled the “new normal”.

However, there was no further detail as to exactly where the axe will fall, although the anticipation is that it will be retail and administrative roles that will bear the brunt.

“Restructuring costs for the cost efficiency measures are included in the third quarter under group functions with €171m, of which €148m in staff costs and €23m in other expenses and depreciation,” the bank added.

Just as importantly, this week’s figures will act as a precursor to a “capital markets day” due to be held in London next week, where the bank’s executive team will, as it put it, “present the strategic direction, the financial target and the new business areas”.

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