The Nordic Superbank Dream

It’s been a dream and a vision for Nordic bankers for a decade; one big Nordic bank, strong enough to compete with the global giants in the international markets and at the same time protect their home markets from hostile intruders. Both Stockholm and Oslo have launched their candidacy to become a new financial center of the world. The plans got buried under the financial landslide of 2008, but now they’re being lifted back up by the major shareholder of the leading Scandinavian bank, Nordea.

“There are large uncomplicated savings through merging domestic banking operations. Unlike mergers across borders, efficiency gains quickly.”

Bjørn Wahlroos

Bjørn Wahlroos is chairman of the board with the Helsinki based insurance giant Sampo Group who also is the major shareholder of the leading Scandinavian bank, Nordea. In a interview with the Swedish newspaper Dagens Nyheter, Monday, Wahlroos confirms that he’s planning on merging Nordea with another major Nordic bank.

In the interview he also confirm the market rumors that Stockholm based Swedbank is the most likely partner in the upcoming merger.

Exactly when the acquisition will take place is still in still kinda foggy.

“We are going to buy when it become financial interesting,” Mr. Wahlroos says.

The Finnish insurer Sampo has bought heavily into Nordea the recent years, and is currently the largest shareholder with control of 20.3 percent of the shares.

Sampo was in autumn given permission by the Swedish Finansinspektionen to increase its ownership to over 20 percent.

“I do not think we’ll exceed a 25 percent ownership,” Wahlroos says today.

Bjørn Wahlroos

However, the Swedish government owns 20% of Nordea and has signaled that it might be interested in selling the post.

And no one knows at this point what kind of deal the Swedish authorities finally will make.

“There are large uncomplicated savings through merging domestic banking operations. Unlike mergers across borders, efficiency gains quickly,” Wahlroos says.

The Slaughter And The Lamb

There has been rumors in the Nordic financial markets since last fall about a possible merger between Nordea and Swedbank.

In the spring of 2007 there was rumors about a merger between Swedbank and the Norwegian DnB NOR.

Of all the major Scandinavian banks, who all been pumping up the Baltic states over the five, six years with tons of complex structured loans, Swedbank has made the biggest mess.

The bank reported a record loss of SEK 10,5 billion in 2009.

Wahlross admits that he has gone through the Swedbank’s results several times, and that he is still studying them – over and over again.

The Swedish newspaper writes that a possible merger between Nordea and Swedbank is a long way ahead, and argues that despite several opportunities during the financial crisis, the parties have not come any closer to an agreement.

Mr. Wahlroos says Sampo was contacted by Swedbank’s board already in autumn 2008 with an offer to join in to strengthen the capital base of the bank.

Swedbank also made the same request to Nordea.

“We knew that our tough conditions would probably be too tough for Swedbank – and they were,” Wahlroos comments.

Christian Clausen

Last year, Nordea’s CEO Christian Clausen, said he was positive to a possible merger with Swedbank.

“I am not surprised that Swedbank once again makes the headlines as a good match for Nordea. Anyone who looks at our financial statements will see that this is a match,” Mr. Clausen said.

But added: “There are also others who are a good match.”

And indeed there is.

Practically any of the larger regional banks in Scandinavia would be a good match.

Who Is The Smartest?

In February 2007 I published a series of articles about the global financial service industry, and warned about what I described as a “financial earthquake”.

(At that point I was not sure how ugly things would turn out to be. I realized that three months later when I met up with Dr. Paul Wilmott and his gang).

The basis for my research at that time was a report from Mercer, Oliver Wyman; “Annual State of The Financial Service 2007,” released at the World Economic Forum in Davos a month earlier.

The report forecasts a wave of acquisitions and mergers within the industry.

Here’s what I wrote in February 2007:

“Banks that have already positioned themselves in the areas of the world with the largest and fastest-growing, primarily in Asia, will totally knock out the traditional commercial banks in terms of value growth. It is expected that growth in these areas will account for 40 percent of the total economic growth in the world over the next five years. Those who have not specialized, or is purely local banks, must therefore penetrate the international growth markets. If not, they will be eaten alive.”

“In other words; only the largest, strongest and smartest banks will survive.”

“The Scandinavian banks are too small to compete with the major global,” Stockholm based analyst Andreas Hakenson at UBS Investment Bank told me over the phone.

But pointed out that the Norwegian and Scandinavian banks can ensure growth by investing in niche products, such as shipping.

Hakenson also pointed at a weakness in the Norwegian bank system; that they are so closely related to the domestic market where they have lived happy with the Norwegian oil-fairytale for many years.

The Scandinavian Dream

It was in the same series of articles Norwegian business veteran, former CEO of DnB NOR and chairman of the global fish farm company Marine Harvest, Svein Aaser, launched the idea of making Oslo the new financial center of the world.

Svein Aaser

Svein Aaser argued that the city of Stockholm already had drawn up plans for developing the Swedish capital into a global financial center, and that Norway had a much better odds of succeeding with such a plan.

“We have technology, we have the expertise and we have the money.”

“Unfortunately, we lack the political will,” Mr.Aaser said.

Svein Aaser and Bjørn Wahlroos seem to share a common dream.

The dream of a Nordic financial supermarket, serving the whole global financial community.

But this vision is likely to remain a dream.

However, it does not mean that all Scandinavian banks will be eaten alive by giants like BNP Paribas, Credit Suisse, UBS or Deutsche Bank.

Another main conclusion of the 2007 Mercer Oliver Wyman report is that size doesn’t necessarily matter.

“The big cap banks – with a market value of more than 50 billion dollars – had a smaller growth in the recent years compared to smaller, mid cap banks. The smoother mid caps have increased their market value by between 9 and 15 percent more than the big caps in the period from 2000 to 2005.”

Checkmate!

According to MOW, surviving in the future world of banking means to always improve products and services, and quickly move strategic positions by placing money in the areas of the world with high growth and high risk.

“If one is to survive in tomorrow’s financial industry, one must learn to think like money,” president of Mercer Oliver Wyman, John Drzik, wrote in the executive summary of the report.

What is going on in the Nordic bank sector right now is much like a game of chess.

The players are sitting at opposite sides of the table, staring at the board, thinking (perhaps like money).

But at some point, one of the players will suddenly make a move and announce with a loud clear voice: Checkmate!

Who’s gonna get the honor of making that proud announcement, remains to be seem.

Whoever it might be – my guess is that it will be made sooner, rather than later.

Related by Economist:

Estonian Company Claims $130mill from SEB

“SEB Robbed Customers,” Whistleblower Says

DnB NOR’s Latest Fuck-Up

DnB NOR: “Comprehensive System Failure”

DnB NOR Except Penalties of NOK 26 million

Swedbank Buy Greek Bonds With Estonian Money