The prolonged period of low volumes has taken a severe toll on many FX trading desks within some of the world’s largest interbank dealers. Following the drastic action taken by Barclays during the last few months which has seen an offloading of its entire European operations, along with an announcement of the redundancy of some 19,000 staff during the second quarter of this year, Danske Bank is now beginning to weigh up contingency plans for the future of its trading desks.
The Danish firm’s CEO Thomas Borgen has confirmed via a telephone interview with Bloomberg yesterday that redundancies could be imminent if trading activity does not recover soon.
“We have during the second quarter adjusted our cost base,” stated Mr. Borgen. “When, or if, the market returns, we are very well positioned. However, if we don’t think it will return, we will of course make further measurements to that respect.”
Danske Bank’s market making operations have been severely affected by the ongoing market inactivity, dropping a substantial 77% in the second quarter when compared to the same period during the previous year, which was a complete dichotomy from this year, heralding record volumes for many firms worldwide.
A lack of volatility, as well as uncertainty on the direction interest rates might take, is keeping many investors on the “sidelines,” Mr. Borgen explained to Bloomberg. Since 2007, Danske Bank has cut its headcount by more than 4,700 people to 18,914 at the end of June, according to its quarterly reports.
Danske Bank has stated that its outlook for trading income for the year is “particularly uncertain.” Though the bank raised its 2014 profit forecast to a net income as high as 13 billion kroner from the 12 billion kroner previously seen, Danske said revenue from trading will depend “greatly” on how markets develop.
Danske Bank’s overall revenue has risen by 2.2% to 2.2 billion kroner last quarter, which includes 1 billion kroner from its sale of a stake in payment system Nets, alluding to the bank’s need to offload assets in order to maintain equilibrium.