Nordic and Baltic Awards for Excellence 2013: By country

Denmark

Best Bank: Nordea
Best Investment Bank: Carnegie

The Danish economy and banking sector are not in great shape. The country is in a recession and might struggle to emerge from it this year. In June, Danske Bank announced a rights issue and small lender Amagerbanken collapsed – the 11th Danish bank to do so since the 2008 financial crisis.

So looking for a strong and well-capitalized bank that has performed well in Denmark in the past year has been tricky, but one bank that is both well capitalized and profitable, despite rising loan losses, is Nordea.

In 2012 Nordea reported total operating income from its Danish retail banking business of €1.51 billion – up slightly on 2011 and the second-highest contributor of revenues after Sweden.

Its profitability was hit by rising loan losses of €443 million, but the bank still managed to report operating profits of €226 million, up from €201 million in 2011.

Underlying this was increased total lending volume to corporates and households in Denmark. Corporate and household deposits were also up on the previous year.

The number of private banking customers rose 4% in 2012 to 43,000; internet banking customers grew 11% to 921,000; and mobile banking customers rocketed 180% to 164,000.

With Danish equity capital markets deal flow thin, and debt capital markets activity as ever dominated by Danske Bank, there was increased competition among investment banks to earn fees advising in mergers and acquisitions.

A healthy 290 of Danish M&A deals worth a total of $15.6 billion were completed in the past year, according to Dealogic, and the bank that advised on the highest number was Carnegie.

The Stockholm-based investment bank has been building its Danish corporate finance franchise since 2011. During the awards period this effort was rewarded by a number of high-profile transactions in M&A and ECM.

In aggregate, Carnegie advised on DKr30 billion ($5.28 billion) of ECM and M&A transactions in the past year, and in M&A alone advised on eight deals worth $1.52 billion, according to Dealogic.

Pick of the M&A deals was its role lead advising Spar Nord Bank on its DKr3.4 billion merger with Sparbank, and its role advising in two notable transactions for brewer Carlsberg and Dong Energy.

In ECM, Carnegie was active on one of few deals of note from Denmark in the past year – communication company TDC’s secondary share offers in November 2012 and February this year. Carnegie was the sole Nordic agent on the DKr3 billion and DKr4.7 billion placements.

back to top

Estonia

Best Bank: SEB Pank

Estonia’s $22 billion economy slowed in the first quarter to the weakest pace in three years as the construction industry stumbled, but even so the country is expected to record 3% GDP growth this year.

The Estonian economy remains in decent shape, supporting corporate revenues and stimulating the labour market, while the capitalization of the banking sector is good, and rapid deposit growth has provided sufficient funding for increases in credit volumes.

Swedbank, by some margin the biggest bank in Estonia by assets is an important provider of credit to the country’s economy, but it is SEB Pank, the Estonian subsidiary of SEB, that wins this year’s award for best bank.

SEB Pank is the second-biggest bank by assets in Estonia, and in the past year has made good strides in expanding its corporate and retail banking franchise.

SEB Pank’s deposit base grew 7.7% in 2012 to the highest level since 2008, and full-year 2012 operating profits were €73.1 million and €32 million in the first quarter.

At the beginning of 2012, the number of customers using SEB Pank’s mobile banking service surpassed the number of people going to branches, and by the end of the year its customers were using the mobile banking services three times more than they were using traditional bank branches.

In addition, SEB Pank developed and launched several innovations in savings and investment products. The most popular was the Digital Coin Jar, which enables customers to set aside virtual cents generated by card payments, similar to a conventional piggy bank. By the end of 2012, the new product was being used by almost 15,000 people, who set aside almost €200,000 in less than two months by saving cents on their everyday purchases.

SEB Pank has increased its cross-border cooperation with SEB’s Latvian and Lithuanian banks through SEB Baltic online, a platform that provides business clients with the ability to manage company accounts in real time. In addition, the bank launched a financial consultation service and digital application that simplifies detailed financial information and analysis of the company, and enables management to run various risk and business projections.

In June, the Finnish financial regulator published its stress test results, which found that Finnish banks and insurers can withstand loan losses and weakening profitability brought on by a three-year recession.

The stress test showed the financial industry has enough capital to endure mounting impairments on loans and a drop in net interest income, and that core tier 1 capital would remain at an average of about 14% through a three-year recession.

For the banking sector in Finland the past year has been challenging, but the bank that has navigated the conditions well, increasing profits while reducing loan losses, and continues to maintain a powerful market share is Nordea.

The bank reported total operating profits of €357 million for 2012 – up from €344 million the year before – and managed to reduce loan losses to €46 million from €57 million in 2011.

In addition, Nordea has maintained its market share in household mortgages, deposits and lending in Finland at about 30%, similar to its market share in corporate lending and deposits, which is equivalent to about 30% and 34% respectively.

In investment banking, Nordea once again remains the bank to beat in Finland, across DCM, ECM and M&A.

In DCM, Nordea was ranked second to Deutsche Bank on value of deals completed, but on number of deals it was streets ahead on 31, worth a total of $3.36 billion, according to Dealogic.

Its strength in debt markets was highlighted in the breadth of deals it helped execute, not least a €120 million domestic hybrid bond for national air carrier Finnair in November last year, and a €400 million seven-year Eurobond for technology and services provider Metso.

In both M&A and ECM, Nordea was ranked number one during the awards period, but the bank transacted the most business by value in M&A, advising on four completed deals worth a total $4.55 billion.

The rehabilitation of Iceland’s banking sector continued in 2012, with the country’s three main lenders all reporting further substantial improvements in profitability, capital adequacy and asset quality.

In terms of outright pre-tax profits, market leader Landsbankinn narrowly edged ahead of Islandsbanki in 2012, but by return on equity the latter was well ahead, with 17.2% to Landsbankinn’s 12%. That represented an impressive recovery by Islandsbanki – formerly Glitnir – from a weak 2011 result that was adversely affected by a hefty goodwill charge consequent on the lender’s absorption of troubled savings bank Byr, a merger that was successfully completed in February 2012.

Last year, Islandsbanki’s balance-sheet grew 3.5% year on year – compared with just 1% at Arion Bank and a contraction of 4.4% at Landsbankinn – while at the same time improving its tier 1 ratio to 22% and overall capital adequacy to a sector-best 25.5%.

The lender was also unique in increasing its deposit base in 2012, making for a healthy deposit-to-loan ratio of 84.5% at the year-end, and was active in seeking funding diversification via the newly opened domestic covered bond market.

Best Bank: ABLV Bank

Latvia remains undeterred in its quest to adopt the euro and is on course to do so on January 1 next year.

It has come a long way since the 2008 financial crisis when the European Union and the IMF agreed to its €7.5 billion bailout, preceding a deep recession in 2009 that heralded a period of stringent austerity that drastically reduced public spending and wages.

Today, Latvia’s economy is growing robustly, its currency has been pegged to the euro for nearly 10 years and as much as 90% of its private and corporate debt is already in euros.

But there remain concerns. A particular worry of the European Central Bank is the Latvian banking sector’s reliance on deposits from nonresidents.

The Latvian prime minister, Valdis Dombrovskis, has said comparisons with Cyprus are unfounded, not least because Latvia’s banking sector is smaller, its banks are better capitalized, the government has tightened up its money-laundering rules in recent years, and those banks that hold large amounts of nonresident deposits have passed strenuous stress tests.

One of Latvia’s strongest banks in terms of capital, and one that continues to grow and generate healthy profits, is ABLV Bank.

ABLV Bank is the largest independent and privately owned bank in the country, and at the end of 2012 reported a robust capital adequacy ratio of 16.04%.

ABLV has been diversifying its funding by replacing long-term deposits with bond market funding. It has raised over €250 million through numerous bond issues since 2011, including three issues this year worth a combined €70 million.

In the first quarter, ABLV Bank was Latvia’s third-largest bank by total assets – €3.31 billion – overtaking Nordea but still behind the country’s two largest banks, Sweden’s Swedbank and SEB Banka. ABLV reported deposits of €2.81 billion – up 5.8% on the first quarter of 2012.

In addition, the bank generated €11.8 million of profits in the first three months, continuing its strong performance in 2012 when it reported full-year profits of €23.4 million and a healthy return on equity of 16.64%.

Best Bank: SEB Bank Group

Some 14 months after Snoras Bankas’s bankruptcy, the Lithuanian banking sector had its confidence shaken again in February this year when Ukio Bankas, the country’s sixth-biggest bank by assets, entered administration.

The Lithuanian banking sector is by and large healthy and well capitalized, not least because it is dominated by strong Nordic banks, but Ukio’s failure because of risky loans cast a pall over the industry as it was just beginning to find its feet again.

Raimondas Kvedaras, SEB. Strength, stability and good performance

The bank’s core tier 1 capital ratio hit 12.82% at the end of 2012 from 9.67% a year earlier, making it one of the best capitalized banks in the country. In addition, SEB’s deposit base grew 2% to Lit12.4 billion ($4.7 billion) – affirming its status as the second-biggest bank by deposits – and new corporate loans to large companies rose 12% to Lit4.8 billion, which included a Lit100 million project loan to the Western Baltic Shipbuilding Company and a Lit92.2 million loan to finance the construction of Kempinski Hotel on Cathedral Square, Vilnius.

Profits in 2012 of €25 million were down on the year before and income was flat to 2011 at Lit541 million.

In retail banking, SEB led several initiatives in 2012, providing new services and financial solutions to customers, such as offering Lithuanian government savings bonds and more structured bonds, as well as launching a free financial planner application on its successful electronic banking platform.

In the past year, Norway’s $480 billion economy has started feel the ill effects of recession in the eurozone. Mainland economic growth is expected to slow to 2.5% this year compared with 3.4% in 2012, while unemployment is on the rise as companies grapple with a surging krone and high manufacturing labour costs.

So far, most banks in Norway are maintaining high capital ratios and income, and decent profit growth.

One bank that has done so with aplomb, proving that big is not always best, is Trondheim-based Sparebank 1 SMN, a savings bank engaged in retail and corporate banking and one of the six owners of Sparebank 1 Gruppen, the second-biggest financial services group in Norway by assets.

With 51 branches across 43 municipalities and some 188,00 retail customers and 13,000 corporate customers, Sparebank 1 SMN is small compared with Norway’s biggest bank, DNB. However, Sparebank 1 SMN’s financial performance in the past year is commendable.

In 2012 net profit grew to NKr1.08 billion ($177.4 million) from NKr1.02 billion in 2011, supported by total income of NKr3.07 billion – up from NKr2.07 billion a year earlier. Its return on equity was a healthy 11.7% and its tier 1 capital ratio was 11.35%, up from 10.43% in 2011.

In addition, retail and corporate deposits and lending all increased substantially in 2012, boosting total assets to NKr108 billion.

This momentum continued in the first quarter of the year, when Sparebank 1 SMN reported net profits of NKr321 million – up from NKr272 million a year earlier – and a return on equity of 12.7%.

ABG Sundal Collier’s particular strengths are ECM and M&A advisory, in which it makes up for its lack of scale with best-in-class execution and distribution capabilities. The securities brokerage and corporate finance house ranked as the number-one bookrunner in Norwegian ECM in the past year, having executed nine deals in total for an equivalent value of $535.2 million, according to Dealogic.

Pick of the ECM deals was its role as joint global co-coordinator and joint bookrunner on the only IPO in the Nordic region during the awards period – the NKr1.7 billion IPO in October 2012 for Norwegian speciality chemicals firm Borregaard.

In Norwegian M&A, ABG Sundal Collier took third position from advising on five completed deals worth just short of $4 billion.

ABG Sundal Collier has also completed financial advisory roles with a number of high-profile clients, including EQT; Fred Olson Renewables; the municipality of Oslo; and Ambea.

In successfully expanding its retail and corporate customer base, achieving disciplined growth in targeted markets while at the same time increasing resilience and flexibility through even stronger capital and liquidity buffers, SEB is Euromoney’s best bank in Sweden.

The Stockholm-based bank has been investing heavily in its retail and corporate banking business and in 2012, continuing the growth trend of the past three years, this resulted in 50,000 new retail or private customers, 100 new large corporate customers and some 13,000 new SMEs.

Much of this success came from SEB’s strategy of focusing on three targeted areas for growth: increasing its customer base and penetration among large corporations and financial institutions in the Nordic region and Germany; expanding its customer base among SMEs in Sweden; and enhancing its savings product and services.

Today, SEB can boast 2,800 corporate and financial institution clients in the Nordic region, and 400,000 SMEs and 4 million private customers. In Sweden alone the bank has the second-largest share of households’ aggregate savings.

The strategy is paying off and supporting the bottom line. At the end of 2012, SEB’s Swedish banking business – a universal offering covering merchant banking, retail banking, wealth management and life insurance – generated operating profit of SKr6.8 billion ($1.02 billion) on operating income of SKr22.24 billion.

This is the biggest contributor to SEB group operating income and profits for 2012, which came in at SKr33.82 billion and SKr14.24 billion, respectively.

In addition to its operating performance, SEB reported a return on equity of 11.1% in 2012, and a higher core tier 1 capital ratio of 15.1% and liquidity coverage ratio of 113%.

Although Carnegie’s strength in DCM is developing well, it has an established and powerful franchise in ECM and M&A advisory and in the past year it has executed several high-profile and complex equity transactions as well as private M&A deals, making it Euromoney’s best investment bank in Sweden.

For example, the debut preference share issues for Eniro, an internet search engine, and Alliance Oil Company were rare and have potentially opened up a new market because in Sweden real estate companies have traditionally dominated issuance in this sector.

Coupled with this was Carnegie’s role as the only local investment bank involved when Renault returned to market to sell its A-share holding in Volvo – a SKr12.8 billion accelerated bookbuild.

The voluntary debt-to-equity swap in oil and gas company PA Resources, followed by a SKr705 million rights issue was one of the most complex transactions executed in the Swedish market in the year.

In M&A, Carnegie played an advisory role on several key private market transactions, not least on the sale of health and fitness chain Actic to IK Investment Partners and the sale of coffee-machine maker Crem International to Priveq Investment and SEB Venture Capital.