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Should Handelsbanken think about paring back headcount in capital markets?

Job cuts

Handelsbanken is in the rare position of being the only large Nordic bank increase its headcount throughout 2011. However, costs remain stubbornly high in its investment bank and, if headwinds continue, cuts could be on the cards.

The Swedish bank ended 2011 with 11,184 employees, which is an increase of over 330 on the previous year. Much of this was down to expansion of its UK retail operation, however.

Nonetheless, it was a strong quarter for the bank – a rarity in the current environment – with operating profits rising by 7% to SEK4.1bn. This is largely down an increase in core lending, however, and the picture in its investment bank doesn’t look nearly as rosy.

Operating profit in the investment bank fell to SEK201m for 2011, down nearly 80% on the SEK1bn in 2010. Headcount within its capital markets division – which also includes the increasingly more profitable asset management arm – is marginally up on the previous year, ending the year with 1,626 employees.

Despite Handelsbanken paring back staff costs in the final quarter by 11% year-on-year, expenses remain prohibitively high. In Q4, the cost-income ratio reached 134.3% as equity, fixed income and FX trading volumes slumped in the face of the eurozone debt crisis.

Handelsbanken is one of the only Nordic banks not to announce any significant redundancies, but its investment bankers should be pinning their hopes on at least a mild recovery very soon.

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