Danske removes human element in currency trading

Bloomberg

Danske Bank A/S is pitching a new product to help clients net their currency transactions and reduce the need for human traders.
The second-biggest Nordic bank won a contract last week with Sweden’s government to provide the service and is now using that success to attract corporate clients.
“For Danske Bank to be the primary, one-and-only supplier of cash management and foreign currency dealing to the Swedish state — that’s not something I will stop talking about with clients,” said Johan Wennerberg, head of cash management at Danske’s Swedish corporates and
institutions division.
Danske’s product matches foreign currency sales against purchases before they’re swapped into, for
example, Swedish kronor.
That can substantially reduce the number of transactions with banks, according to Wennerberg. It also means clients are in a better position to control risk and cut costs, which includes eliminating the need for
in-house currency traders, he said.

C&I Challenges
The contract is a much-needed boost for Danske’s corporates and institutions division. The unit
reported a first-quarter drop in pretax profit of almost 40 percent, measured as a percentage of allocated capital, after trading income plunged by a third and oil-related impairments rose.
Danske Chief Executive Officer Thomas Borgen has high ambitions for C&I, a unit he ran before becoming CEO.
Being based in a region with three active central banks means there’s substantial client demand for
currency management services.
Borgen has said the C&I business plays a ‘vital role’ in realizing his ambition of expanding in the Nordics.
He ordered a reorganisation in 2014 as tougher regulatory requirements and low interest rates weighed on trading and interest income.

FX Rankings
Since then, rates have plunged further. What’s more, Danske hasn’t been able to overtake its Swedish peers in the Nordic currency
markets.
Euromoney last week ranked SEB and Nordea Bank as the region’s two largest in foreign exchange. But Danske is hoping its effort to reduce the number of transactions in that market will ultimately give it the upper hand.
“Margins aren’t getting bigger in any business on the corporate side, making cost efficiency a high priority,” Wennerberg said. “Every treasury and CFO realizes they should centralize if they have cross-border flows but perhaps they can’t employ more people. We’re telling them to give us the
mandate and we’ll do it.”