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The frosty outlook for the Nordic banking sector

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Even when Europe’s big winter freeze finally eases, the climate for bankers (and bankers’ bonuses) is likely to remain distinctly icy this year.

Full-year and Q4 2011 results from Danske Bank, SEB and DnB this week are pointing to much the same message: the next 12 months in the Nordic banking sector will be a period of belt-tightening and cost constraint.

What’s more, with Swedbank late last year announcing cuts within its Large Corporates and Institutions (LC&I) business, expectations are not overly optimistic for when it announces figures next week.

The notoriously risk-averse DnB – which formally changed its name from DnB Nor in November – was the most upbeat, with the bank revealing it had actually added to its headcount, with some extra 225 full-time positions during the year, including within its Large Corporates and International business.

As a result quarterly operating expenses within LC&I rose 16.5% compared with Q4 2010, led by an increase in staff numbers “in strategic priority areas” as well as extra investment in IT and other associated costs.

As of the end of December this division accounted for 1,174 full-time posts, including 670 outside Norway, against 1,103 at the same point at the end of 2010, it added.

Overall, during Q4, the group “further expanded its operations in Norway and internationally, and there were rising costs in areas where remunerations are directly linked to income”, with “wage and price inflation” adding NOK111m to its quarterly operating expenses, it said.

It was a much gloomier picture at Danske Bank, however, also reporting today, which refused totally to rule out redundancies between now and 2014 as it worked through the further 2,000 job cuts (on top of the 2,000 lost since 2008) it announced last year.

While the bank stressed it expected that “a substantial number” of these reductions could be made without redundancies, this would only be the case “if staff turnover, including retirements, remains at the usual level”.

The group, Danske added, would during 2012 “focus heavily on cost control and measures to improve earnings” and it also expected “earnings to remain low” during the year.

Performance-based pay was unchanged for the year, at DKK600m.

Finally, SEB’s figures earlier this week revealed a tight rein continuing to be kept on expenses, with operating expenses down 3% in both Q4 against the previous quarter in 2010 and year-on-year, to SEK5.93bn and SEK23.1bn respectively.

Within this staff costs also decreased by 3% in the quarter and were unchanged, at SEK13.93bn, across the year.

Moreover, president Annika Falkengren predicted all Nordic bankers could expect was more of the same.

“The highly uncertain economic landscape and challenging new banking regulation will further increase the future cost in the banking industry. In this perspective, it is a challenge to, on top of European regulation, adapt to an even stricter Swedish regulatory framework with earlier implementation than for our European peers,” she said.

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