Nordea is back on a growth track. The Nordic region’s largest bank has made a significant turnaround in its performance over the past two years by focusing on its customers and executing its business plan. Chief Executive Officer Frank Vang-Jensen shares his leadership philosophy with International Banker and explains how the successful changes in the bank’s strategic direction were implemented.
In the autumn of 2019, Nordea’s recently appointed Chief Executive Officer (CEO), Frank Vang-Jensen, and his leadership team faced a challenge. They recognised that, over the past couple of years, Nordea’s customer satisfaction levels had dropped and its financial performance had not been at the level expected by shareholders and financial markets. Nordea needed to make a significant change, set a new direction.
As the leading Nordic bank and one of the top 10 banks in Europe, Nordea had a solid foundation on which to build. The combined economies of its Nordic home markets represented the world’s 10th largest economy, and it had a strong market position in Denmark, Finland, Norway and Sweden in each of its four business areas: Personal Banking, Business Banking, Large Corporates & Institutions and Asset & Wealth Management.
“We had all the right building blocks, but we weren’t performing as expected. We needed a major change in both our mindset and way of working. The starting point for this cultural change was to put our customers at the centre of everything we did,” Frank Vang-Jensen says. “We also needed to take a close look at what was stopping us from performing at the level our customers expected. We lacked a clear focus and priorities. Our way of working was too complex. So we were determined to demolish complex structures and give our employees at every level of the organisation clear ownership of their work.”
“The recipe might sound simple, but the simplest things are often the hardest to achieve,” Frank states. “It’s about prioritisation, having a clear focus, keeping customers at the centre, execution and ensuring consistent and effective follow-up.”
Performance culture and focus on customers
To achieve the financial targets, Frank and his leadership team wanted to create a performance culture that would drive better results throughout the bank. They decided to put Nordea’s four business areas in the driver’s seat by empowering them and increasing their accountability. As part of a major cultural change, the business areas were given full accountability for their income, costs, risks, customer experience, investment decisions and capital management.
At the same time, the leadership team worked to increase clarity and improve operational efficiency throughout the organisation. They set out to de-layer the organisation by having far fewer middle-manager positions and large bank-wide committees, which had slowed down internal decision-making.
“A strong performance culture is essential for achieving long-term change, but I’m glad that we have made our most important improvements in our customer focus. Our financial strength and capabilities give us the tools to support our customers in multiple ways,” Frank explains. “But at the end of the day, it’s our people who make the difference. Thanks to the dedication and commitment of our employees, we have been able to improve our customer experience and satisfaction scores significantly, drive higher customer activity and increase business volumes, and improve our financial performance.”
According to Frank, “Everything at Nordea starts with our customers; everyone has the responsibility to make them their priority. Many of our employees do not have direct contact with customers, but they are working to support their colleagues who do. The change we needed was to make sure we were eager to learn from and listen to our customers. To do things a bit better every day. This is the key message that I have wanted to convey in the bank.”
The key changes in the corporate philosophy have led to a turnaround in Nordea’s financial performance. By the third quarter of 2021, the bank had increased its total operating income by 9 percent compared with the second quarter of 2019, while at the same time driving operating expenses down by 7 percent. Nordea’s focus on income growth initiatives and a sound cost culture have led to a strong development in its cost-to-income ratio, which improved to 49 percent in the third quarter of 2021, compared with 58 percent two years ago.
Nordea has increased volumes and market shares throughout the Nordic region. Mortgage lending has grown by 14 percent, and lending to small and medium-sized enterprises has increased by 15 percent since the second quarter of 2019. At the same time, assets under management have grown by 28 percent. Nordea’s capital position is among the strongest in Europe, and the bank continues to generate capital each quarter. The bank’s return on equity has improved to 10.8 percent from 8.6 percent in the second quarter of 2019.
Nordea’s combination of priorities—creating great customer experiences, driving income growth initiatives and optimising operational efficiency—has led to strong progress towards achieving its 2022 financial targets.
“We lacked credibility when we started this journey. Now we have shown that we do what we say—we deliver on our priorities and financial targets,” Frank concludes.
Plans and priorities are worth very little without a determination to deliver. As the bank’s CEO, Frank Vang-Jensen has kept his eye on Nordea’s long-term vision and direction while consistently focusing on daily business and execution.
“First, you need a clear plan, which describes the direction in which you are heading. You need to understand and also communicate the bigger picture. This is important to get people on board and make everyone understand that they have an important role to play. And, again, customers are at the core of the plan,” Frank says.
“Second, you always need to focus on the execution and the details. A large part of banking is about getting the details right. It’s about the efforts in every corner of the bank to deliver great customer experiences. If you can’t do that, you will be left behind.”
“And third,” he concludes, “you need the right people and the right leaders in the right positions, leaders who truly understand their business and are passionate about driving it forward. At Nordea, we now have clear roles and responsibilities. We say things as they are; it’s a no-nonsense culture. We keep things simple and make sure our organisation stays simple and flat. Rational decision-making is key.”
Nordea has more than 30,000 employees, who come from all over the world and collectively speak around 50 different languages. The gender balance in the total workforce is currently 51 percent women and 49 percent men. All these different backgrounds, experiences and qualities give the bank a broad perspective, enabling it to better serve its customers.
“We believe both our employees and culture are key to our sustainable value creation. We trust that diversity and inclusion contribute to better collaboration and engagement, leading to better decisions and results,” Frank explains.
To drive the cultural change throughout the bank, Nordea’s different functions and teams have identified and implemented a significant number of improvement initiatives, both small and large, in the past two years.
“I’m constantly impressed by the engagement and understanding in the organisation—that every little improvement we do matters,” Frank continues. “The sum of these small improvements and the energy and passion of all our colleagues at Nordea have made our change of direction and improved performance a reality.”
Driving for a digital and sustainable future
“We are in a strong position in both these areas, and our financial performance gives us tools to continue developing for the future,” Frank asserts.
While banking continues to move from face-to-face contact to digital platforms, Nordea is committed to maintaining personal relationships with all its customers in all channels and interactions. The common denominator in Nordea’s response to future developments in digitalisation is its strong belief in relationship banking.
“It’s always up to our customers to decide how they wish to interact with us. For example, it can be through mobile banking only, through online meetings with our advisers in the comfort of their living rooms, or through in-person advising in our branches. We are confident in our expertise, and will continue to meet our customers through the channels that are best for them and their unique financial situations.”
Nordea’s mobile banking platform now has more than one billion customer logins annually, and the figure is growing rapidly. The app is receiving top ratings in major mobile app stores across the Nordic region. Retail customers use Nordea’s mobile and Netbank services for their daily transactions. They can apply for a mortgage via the mobile app and receive a digital loan promise within minutes. They can also sign mortgage agreements digitally. When it comes to helping customers with their savings needs, two-thirds of all retail savings activities are now conducted through digital channels.
Nordea’s corporate customers are also continually offered new digital services, for example real-time payments to consumers and a fully-automated liquidity management tool to streamline daily routines related to foreign exchange and currency flows.
“To us, it’s about being a personal financial partner to our customers, in all channels and interactions. We do this through our omnichannel model, a combination of high-quality digital and in-person services,” Frank explains.
Meanwhile, Nordea has embedded sustainability across the Group business strategy, backing it with measurable targets, strong governance and one of the broadest ESG offerings in the market.
“We don’t view sustainability as a project for us. It’s an integrated part of our value proposition to customers, how we run the bank, organise our internal operations and manage our risks. It’s a lifestyle—it’s at the core of our culture,” Frank highlights.
Earlier this year, Nordea announced its updated sustainability targets and committed to becoming a net-zero emissions bank by 2050 at the latest. The goal is backed by a tangible mid-term target to reduce carbon emissions from its lending and investment portfolios by 40 to 50 percent by 2030.
“All in all, an ambitious, realistic and step-by-step approach to the sustainable transition will be good for society and good for our business,” Frank summarises.
Both digitalisation and sustainability are clear long-term success factors for Nordea.
“We are focusing on relevant service offerings and very strong customer support. And following our plan—keeping customers at the centre. For example, we have provided sustainability training to all customer advisers across the Nordics so that they can support both private and corporate customers in making good and informed decisions.”
Updated targets, but no change in direction
When Nordea launched its current strategic direction, three key priorities were included in the plan: creating great customer experiences, driving income growth initiatives and optimising operational efficiency.
“Over the past two years, we have consistently delivered on our business plan and key priorities. This would not have been possible without the strong commitment and deep engagement of all our colleagues across the bank. It has led to a solid development in our financial performance, which, in turn, has enabled us to make decisive progress towards our 2022 financial targets: a cost-to-income ratio of 50 percent and a return on equity above 10 percent,” Frank summarises.
Nordea is currently preparing new financial targets and updates to its business plan, and intends to publish them in February 2022.
“Our targets will be updated, but our direction as a bank is not going to change. For more than 200 years, we’ve played a key role in supporting and growing the Nordic economies. That will be our role going forward as well,” Frank concludes.