(Bloomberg) — Danske Bank A/S will cut 1,600 jobs as part of its ongoing effort to save money amid spiraling compliance costs and long-term negative interest rates.
“It is never easy to reduce the number of colleagues, and we will do our best to ensure that we do this in the most decent and respectful way,” Chief Executive Officer Chris Vogelzang said in a statement on Thursday. “However, we need to adapt to the structural changes that the financial sector is experiencing.”
Danske is still being investigated for a vast money laundering scandal, which triggered a jump in the lender’s compliance costs. More recently, Denmark’s biggest bank admitted it overcharged retail customers for years due to errors in its debt collection system.
The bank, which has lived with eight years of negative rates in its home market of Denmark, is under growing political pressure to improve its business as the regulator and parliament lose patience with the string of scandals.
Vogelzang said the cuts are needed “to remain competitive in a low-margin and highly competitive market.” The measures are part of Danske’s so-called 2023 plan, which targets becoming “even more efficient and competitive,” it said.
Shares in the bank traded about 0.8% higher when the market opened on Thursday in Copenhagen. The Bloomberg index for European financials was up about 0.5%.
Per Hansen, an investment economist at Nordnet, said the cuts are “painful” but “unavoidable” if Danske is to reach its targets, including a return on equity of about 9-10%.
“Increased requirements in digitization and the need for lower costs make it completely natural to continue to cut,” Hansen said in a note to clients.
The bank currently employs about 22,000 people, which is up from 20,000 in 2017, in part as management stepped up its compliance department. Roughly 11,000 work in Denmark, where Danske is based. Staff will have the option of applying for voluntary redundancy agreements until Oct. 25, the bank said.
“We simply have to reduce our costs,” Vogelzang said.
(Adds shares, analyst comment)
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