Danske Bank is set to shed 2,000 employees as part of a two billion kroner cost-cutting plan after announcing poor third quarterly results.
Denmark’s largest bank announced it hoped to cut operating costs by 10 percent by 2014 after posting after-tax profits of only 1.5 billion kroner – down from 2.6 billion kroner in the same period of 2010.
“The third quarter has been characterised by increased financial instability,” managing director Peter Straarup wrote in the bank’s quarterly financial statement. “The current crisis, new government and high financing costs has placed pressure on the group’s results.”
Danske Bank is following in the footsteps of Danish banks Nordea, Jyske Bank and Sydbank who have all announced similar cost-saving measures in recent weeks.
Almost ten percent of Danske Bank’s 21,567 employees will be affected by the cost-cutting measures.
“It means reducing our number of staff by about 2,000 over three years. It is hoped that a considerable part of this reduction can be done without layoffs as long as we keep to normal staff turnover and retirement levels,” a statement from Danske Bank read.
2011 has proved a testing year for Danske Bank, which saw turnover levels reduce by 11 percent to 31.5 billion compared to the same period in 2010. The poor results have been blamed on low interest levels, limited economic growth and unstable capital markets.
Danske Bank posted a third quarter pre-tax deficit of 384 billion kroner compared to a surplus of 887 million kroner in the third quarter of 2010. The decline was explained by two factors: firstly the reduction in trading income from 1,904 million kroner to 267 million kroner, and secondly, the loss of 735 million kroner – compared to gains of 705 million kroner in the same period in 2010 – by their insurance arm, Danica Pension.
It was hoped that the 0.5 percent interest rate, introduced on July 1, would raise interest income by 500 million kroner though this did not materialise.
But while the bank struggles to strengthen its profit margins, it still managed to increase its equity by over 20 billion kroner to 125 billion kroner compared to the third quarter of 2010, while also cutting operating costs by almost 800 million kroner to 5.5 billion kroner.
Danske Bank also announced that the 60-year-old Straarup will be retiring and that they are now looking for his replacement.
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