The chief executive of Nordea Bank says his industry needs to rethink pretty much everything it’s doing to brace for the future.
And that includes how much it is paying bankers.
The Nordic region’s biggest financial conglomerate is already in the process of cutting 6,000 jobs as part of a shift toward relying more on technology and less on humans. But the chief executive Casper von Koskull says the search for more efficient ways of doing business will not end once those jobs are gone.
“People said automation is only in personal banking,” Mr von Koskull said in Stockholm. “But there are elements of it in investment banking, corporate banking, liquidity management, foreign exchange. You need to look at how much of it is automated and whether there’s less human involvement.”
There will always be a “human element,” he said. But ultimately, “you need to ask the question, what value is the human adding, and how does that affect pay?”
Mr von Koskull’s mission is to blaze a trail that other banks will be inspired to follow. In explaining his world view, he uses phrases like “you don’t need banks, but you need banking”. He also insists that “bankers need to be more tech savvy, and understand how you use tools”.
He envisions a flatter organisation. So when it comes to the bank’s planned job cuts, that means “the ones who are mostly hit are middle to higher-level management, because those layers aren’t needed, or shouldn’t be”, Mr von Koskull said.
None of this should make a career as a banker less appealing, he said.
“If you’re passionate about the customer and about providing value to customers, and frankly also to society, I think it’s a fantastic place, still, to work,” he said.
Investment banking, in particular, is a special case, according to Mr von Koskull. “Because at the end of the day, it’s not just about the facts,” he said. “I’ve always said finance is a social science anyway, it’s not an exact science. So if you’re a merger adviser or a wealth adviser, it’s about trust and relevance.” But even here, “technology will have an impact”.
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And banks are “also a place where a lot of society would say that we are still, even, paid too much”, Mr von Koskull said.
The question of banker pay is one that regularly triggers acrimony from some corners of society. Just last month, the chief executive of UBS, Sergio Ermotti, and a former deputy governor of the Bank of England, Paul Tucker, were at opposite ends of a heated debate questioning the remuneration culture in the finance industry. At the same time, there is a growing list of banks who are ditching humans as they rely more on automation.
Mr von Koskull says that banks who do not follow Nordea’s lead are ignoring “cost drift”. He expects his firm to soon be “probably the only large European bank that has completely transformed its core bank system to a modern system".
"It’s a completely different bank at that cost level."
Ultimately, all of this benefits the shareholders, he said.
“Over the years, while we transform, we have a very clear aim to have a progressive dividend policy, which means it will grow every year in absolute terms.”