If you work at Nordea Markets/FICC in Sweden, you may have noticed the two girls rotating around the markets floor with a fascinated yet slightly lost look on their face. Even though we are currently in our fourth week at FICC, thereto our seventh in the building at Smålandsgatan 17, a constantly increasing number of impressions and insights have made time travel fast.
We are both last year master students at the Stockholm School of Economics – Xia-Ying specializing in Finance and Accounting and Matilda in Accounting and Financial Management. With that said, one of our first conclusions is that theory does not even come close to being as interesting as practice.
The reason for us being at Nordea is that we are currently attending a one-semester program called the Executive Trainee Module (XTM), which is based on a collaboration between our school and eight partner companies (Nordea, Atlas Copco, Ericsson, IBM, McKinsey, Millicom, PwC, and Röda Korset). Instead of pursuing elective courses, we work full-time at Nordea for the whole semester. A concept that is unique for Nordea among the corporate partners is that we have the privilege to rotate between four different departments within Wholesale Banking: Corporate and Institutional Banking, Markets, Corporate and Leveraged Finance, and Advisory, while the other XTM participants solely work with one project during the semester. The program will result in an academic report, connecting theory to practice.
Our first week at FICC started out with the Strategy & Research (S&R) team where we got a case about political regulations for financial stability and their effects on the banking sector in general, and Nordea in particular. To our help, we had a couple of interviews scheduled with different people in the team that were more informed on the subject than the two of us.
Furthermore, reports from the central bank (Riksbanken) and the Swedish Financial Supervisory Authority (Finansinspektionen) served as first hand sources as we tried to gather as much information as possible on the subject. By the end of the week, the case resulted in a final presentation in front of three representatives from S&R. Knowing that the audience was much more well-grounded in the subject than us added to the anxiety. However, we had a very constructive dialogue with the team representatives asking questions that made us think a step further.
The second week was spent with Risk Advisory (RA), primarily with FX and commodities. Instead of being given a case, the work consisted of several minor projects in order to gain insight into as many aspects as possible of RA:s contribution to FICC. Furthermore, an extra dimension was added through daily lectures/discussions with the different RA teams. Predominantly, the task of the week was to investigate how companies can hedge currency risk in debt covenants that includes both income statement and balance sheet items, such as Net debt to EBITDA. In order to do so, we were given the opportunity to meet with representatives both from RA and from other departments in Nordea – for instance Corporate and Leveraged Finance. We got to know the complexity and interrelations of Nordea and, luckily, the willingness of people to collaborate across the organization.
Another project involved conducting an “option school” where we, in a simplified way, described basic strategies for hedging commodity risk. The purpose was to create a material that can be used as a whole or in parts in client meetings. This task gave us a legitimate excuse to talk to people in the group with expertise, whose explanations were more understandable than those found in school-books. Instead of writing pay-off diagrams, we started thinking about the actual implications on client P&L which turned out to be useful for another assignment later on.
Our third week was mainly focused around a client oriented case within FX. The case involved introducing a currency hedging strategy to an actual company currently not using FX derivatives or hedging as part of their financial policy. Whereas our previous weeks had been scheduled on beforehand, this particular week was entirely up to us when it came to how to dispose of our time and what meetings to attend to. We ended up being able to sit by the FX desk, which enabled ongoing interaction with several knowledgeable colleagues. This truly increased our understanding of how the client relationships are managed on a daily basis, and gave us a head start on the case, in particular with regards to our knowledge of different currency derivatives and hedging solutions. Nevertheless, the presentation was challenging as always and was rounded off with some constructive feedback that we definitely felt will be useful in the future.
We are currently in our fourth week at Nordea Markets/FICC, working with Investments to come up with a portfolio recommendation for a fictive client. It has been three intense and educative weeks this far. An important insight up until this point has been that people are more than happy to share their knowledge. Whenever we felt like getting stuck, there has always been someone to talk to who did not mind sparing us some of their time. We believe that this has been the most valuable characteristic of the people working at Nordea and one of the most important incentives for us coming in to the office every morning, knowing that we are among knowledgeable and open-minded co-workers. After all, we are still students who are in it for the learning experience.