Nordea stands out as a pioneer – This is how the portfolio manager sees the company’s potential

Financial Group Nordea said about two weeks ago that it would initiate major reorganizations to improve efficiency and strengthen competitiveness.

As part of the restructuring, the bank’s systems are simplified and pruned, and data and artificial intelligence are planned to be used even more widely. The changes will affect approximately 1,500 employees during the years 2026–2027.

The intention is to achieve annual savings of 150 million euros from 2028 and a total cost savings of at least 600 million euros by 2030.

Near Tapiola portfolio manager Heikki Urpelainen according to the news was to some extent expected, as Nordea has previously been told about strong spending targets. Nordea aims to reduce the cost-benefit ratio to approximately 40–42 percent by 2030.

However, Nordea’s plans for scalability were a bigger issue than cost savings. Digitization and IT investments have been made for a long time, but now it would seem that Nordea can truly utilize them effectively. It is also interesting that Nordea seems to be at the forefront of scalability and automation, and the Nordic competitors are following.

“The news of the dismissal reflects that Nordea has reached or is reaching the goals that the systems seek and achieve efficiency,” says Urpelainen.

Although large redundancies are unfortunate from the perspective of employees, there are positive things to be found from an investment perspective.

According to Urpelainen, big banks have emphasized the importance of economies of scale, but in reality, in the Nordic countries and Europe, economies of scale have been buried under bureaucracy and managerial layers.

“Now it seems as for Nordea that it is one of the few in the Nordics that is able to get economies of scale with the help of IT systems and artificial intelligence, and this is reflected in the fact that employees are no longer needed for manual work.”

Nordea has prioritized investing in automation and thus has now been able to calculate costs that may be caused by regulation.

Urpelainen estimates that the advantage can be a couple of percent extra revenue growth compared to competitors.

More profit sharing for owners

The estimated annual savings of 150 million euros is not a huge amount for a company the size of Nordea, but it is nevertheless significant.

Nordea plans to use the saved funds to probably increase the dividend or buy back its own shares. The growth rate is moderate and no large capital is needed, so the profits can be distributed to the owners. Nordea has also not communicated that it is actively planning acquisitions.

According to Urpelainen, Nordea’s share price is currently reasonable. Nordea has a good dividend-paying capacity and a stable business, which increases its investment potential.

On the other hand, according to Urpelainen, banks are often assessed as too cheap from the point of view that banks still have a risk of credit losses. In addition, during the faster growth of the loan portfolio, capital is needed as a buffer on the balance sheet, which means possibly tightening the dividend payment.

According to Urpelainen, Lähi-Tapiola has not made any changes to its Nordea holdings after the news, because the importance for the investment story was not great enough. The price should fluctuate by about ten percent compared to benchmarks or the market in order to increase or decrease the share’s weight.

“All shares have fallen due to the situation in Iran. But if, compared to other shares, Nordea fell by ten percent, it would make it more attractive compared to the others.”

Nordea’s share price has declined by a little more than six percent since the beginning of the year. Within a week, the increase has been about four percent. Analysts are generally positive about Nordea’s stock. Bloomberg’s according to the data collected, analysts are mostly positive about the stock’s recommendation.