Swedbank AB (SWEDA), Sweden’s biggest mortgage lender and the largest bank in the Baltics, will cut as much as 5.5 percent of its staff to try to adjust to the low rate environment created by unprecedented central bank easing.
The bank will cut 600 to 800 jobs in the coming two years, mainly through attrition, and aims to lower costs “towards 16 billion kronor” ($2.23 billion) in 2016 from 16.6 billion kronor in 2013, the Stockholm-based lender said in a statement today.
It had 14,604 employees at the end of September. Its third-quarter results showed a 9.3 percent increase in profit. Sweden’s central bank on July 3 cut its main interest rate by a bigger-than-estimated 50 basis points to 0.25 percent.
The threat of a deflationary spiral gripping the largest Nordic economy has prompted a number of banks, including Nordea Bank AB, SEB AB and Swedbank, to predict that the Riksbank will be forced to cut rates further before the end of this year.
While Sweden’s economy is relatively strong, “low inflation is raising pressure on the Riksbank to further reduce interest rates,” Swedbank Chief Executive Officer Michael Wolf said in the statement.
The bank’s efforts to improve its services “coupled with the low inflation rate and low interest rate environment, means we have to cut our costs,” he said.
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Swedbank rose as much as 3.7 percent to 183.8 kronor in Stockholm trading, its highest price since March 19, and traded 3.3 percent higher at 9:10 a.m. Swedish time.
Volume was at 41 percent of the daily average in the past three months. Swedbank’s third-quarter results were “impressive” and “driven by quality earnings,” Mats Anderson, an analyst at Kepler Cheuvreux in Stockholm, said in a note to clients today.
Both net interest income and commission income exceeded expectations while costs were lower than estimated, he said. The net interest income “reflects deposit margin squeeze, but, importantly, margin expansion on mortgages, volume growth and improved funding cost,” Anderson said.
“Swedbank has been able to more than offset the negative impact of the Swedish 50 basis-point rate cut in early July,” he said. Net income in the three months through September rose to 4.56 billion kronor from 4.17 billion kronor a year earlier.
That beat the 4.23 billion-krona average estimate of eight analysts surveyed by Bloomberg. Net interest income rose 3.3 percent to 5.83 billion kronor in the quarter while net commission income gained 12 percent to 2.82 billion kronor.
Sweden’s banks have emerged as the best capitalized major lenders in Europe, measured by core Tier 1 ratios, amid stricter local requirements. Swedbank’s common equity Tier 1 was 20.7 percent of its risk-weighted assets at the end of September, down from 20.9 percent at the end of June.
bloomberg.com
The bank will cut 600 to 800 jobs in the coming two years, mainly through attrition, and aims to lower costs “towards 16 billion kronor” ($2.23 billion) in 2016 from 16.6 billion kronor in 2013, the Stockholm-based lender said in a statement today.
It had 14,604 employees at the end of September. Its third-quarter results showed a 9.3 percent increase in profit. Sweden’s central bank on July 3 cut its main interest rate by a bigger-than-estimated 50 basis points to 0.25 percent.
The threat of a deflationary spiral gripping the largest Nordic economy has prompted a number of banks, including Nordea Bank AB, SEB AB and Swedbank, to predict that the Riksbank will be forced to cut rates further before the end of this year.
While Sweden’s economy is relatively strong, “low inflation is raising pressure on the Riksbank to further reduce interest rates,” Swedbank Chief Executive Officer Michael Wolf said in the statement.
The bank’s efforts to improve its services “coupled with the low inflation rate and low interest rate environment, means we have to cut our costs,” he said.
Shares Soar
Swedbank rose as much as 3.7 percent to 183.8 kronor in Stockholm trading, its highest price since March 19, and traded 3.3 percent higher at 9:10 a.m. Swedish time.
Volume was at 41 percent of the daily average in the past three months. Swedbank’s third-quarter results were “impressive” and “driven by quality earnings,” Mats Anderson, an analyst at Kepler Cheuvreux in Stockholm, said in a note to clients today.
Both net interest income and commission income exceeded expectations while costs were lower than estimated, he said. The net interest income “reflects deposit margin squeeze, but, importantly, margin expansion on mortgages, volume growth and improved funding cost,” Anderson said.
“Swedbank has been able to more than offset the negative impact of the Swedish 50 basis-point rate cut in early July,” he said. Net income in the three months through September rose to 4.56 billion kronor from 4.17 billion kronor a year earlier.
That beat the 4.23 billion-krona average estimate of eight analysts surveyed by Bloomberg. Net interest income rose 3.3 percent to 5.83 billion kronor in the quarter while net commission income gained 12 percent to 2.82 billion kronor.
Sweden’s banks have emerged as the best capitalized major lenders in Europe, measured by core Tier 1 ratios, amid stricter local requirements. Swedbank’s common equity Tier 1 was 20.7 percent of its risk-weighted assets at the end of September, down from 20.9 percent at the end of June.
bloomberg.com
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