BEST
BANK
Nordea
BEST DEBT HOUSE
Deutsche Bank
BEST EQUITY HOUSE
ABN Amro / ABN Amro Rothschild
BEST M&A HOUSE
Citigroup
BEST AT CASH MANAGEMENT
SEB
BEST AT RISK MANAGEMENT
Deutsche Bank
BEST AT INVESTOR SERVICES
SEB
BEST SMALLER BANK, BALTICS
Suprema Securities
The impressive performance of Nordea during 2004 is primarily attributable to its focus on cost control. During the year, total income increased by just 1% – although there was an 8% pick-up in the fourth quarter – but profit increased by 28% and earnings per share hit an all-time high of €0.69 compared with €0.51 in 2003. The bank has also been focused on creating value for its shareholders in other ways and in October 2004 completed a buyback of about 5% of its outstanding shares.
Figures from the first quarter of this year suggest that all units of the bank are working well. Mortgage lending to personal customers increased 15% year on year, lending to small and medium-size corporates rose 14%, assets under management went up 11% to €36 billion and written premiums in life insurance increased by 23%. The bank, which is the biggest financial services group in the region, announced a further mandate for share repurchases during the same quarter, indicating the potential for greater increases in shareholder value.
Deutsche Bank scored a narrow victory over Credit Suisse First Boston for the best debt house in the Nordic and Baltic region award. Overall, though, it had a slightly higher market share – 7.96% to 7.50% – and a far larger number of deals – 77 to 46. Perhaps most important, it had more top-five places across the Nordic and Baltic region: in Finland it was fourth, in Iceland first, in Lithuania first, in Norway fifth, and in Sweden fourth. That breadth of coverage makes the bank unique.
The bank has been involved in some interesting deals in the past year, including Housing Financing Fund of Iceland’s IKr268.9 billion ($4.13 billion) debt exchange in June 2004 – the first debt exchange in the Icelandic market and one of the largest completed in western Europe. Another high-profile exchange was for Finland’s Metso in November – a high-quality deal that successfully extended the company’s maturity profile.
ABN Amro is perhaps not the most obvious choice as the best equity house in the Nordic and Baltic region. It has a 9.79% market share and comes third in the league table for the awards period behind Goldman Sachs on 11.52% and Merrill Lynch on 11.3%. But ABN Amro has completed 10 issues compared with Goldman’s six and Merrill’s three, reflecting its relatively deep links in the region and strong flow of business. The bank also performed well across more of the region than its chief competitors.
Among ABN Amro’s deal highlights were two substantial placements of stock in TDC, Denmark’s largest telecom company. In June, US telecommunications and internet provider SBC Communications sold a 32.1% stake in TDC in the largest secondary share accelerated placement in Danish market history. Lead managers ABN Amro, Citigroup and Goldman Sachs sold 51.4 million shares to institutional investors, raising DKr9.7 billion ($1.59 billion). Then, in November 2004, the same banks helped SBC exit its legacy investment in TDC with a DKr4.4 billion sale of 20.6 million shares (9.5% of the company). ABN Amro’s other impressive deals as bookrunner include Neste Oil’s IPO, which 20 times oversubscribed.
Citigroup is this year’s winner of the M&A award. The bank came first in the league table over the awards period, with a 9.57% market share, compared with second-placed Nordea on 8.56% and third-placed Enskilda on 7.65%. Ostensibly one might take the greater number of deals done by both those banks – Nordea completed 23, Enskilda 42 and Citigroup just 10 – to mean that the US bank has focused on a handful of big markets. But that is not the case.
Although the bank was involved in the Nordic M&A deal of the year – the $3.85 billion leveraged buyout of Danish cleaning company ISS, a deal as controversial as it was successful – and the huge purchase of Estonia’s Hansabank by Swedbank, it was also well represented right across the Nordic and Baltic regions. Citigroup was placed fourth in Denmark, first in Estonia, second in Iceland and second in Sweden – a unique spread of top-five placings across the region that was only challenged by Enskilda and JPMorgan, which came fourth in the region overall with a 7% market share.
SEB already offered the most comprehensive cash management offering in the Nordic and Baltic region and the launch of a strategic alliance between the bank and ING in the first quarter of 2005 – with polymer technology group Reichhold and specialized products and engineering solutions provider Alfa Laval as launch clients – could only strengthen its credentials. It means companies have access to a genuine pan-European payment and cash management alternative to global banks, which necessarily try to impose top-down solutions on their clients.
In the alliance, it is SEB that is responsible for cash management services in Denmark, Estonia, Finland, Latvia, Lithuania, Norway and Sweden, having the local operations in place. But the combination of ING and SEB’s efforts means that clients have a single point of entry to tailor-made cash management solutions in Europe. The benefits for customers include centralized European liquidity management as well as strong local banking support.
Deutsche Bank wins this year’s award for risk management in the Nordic and Baltic region for the second year. It provided in-depth risk management analysis to nearly all of the Nordic region’s big institutions during 2004 and 2005 and offers the full suite of strategic advice on risk management of correlation between assets and liabilities on diverse balance sheets with commodity, inflation, foreign exchange and interest rate exposures. Given the importance to the region of commodity producers, Deutsche Bank’s focus on the development of risk management solutions that offered exceptional precision thanks to the use of credit derivatives, and analysis of the correlation between different risks, was a great success.
Given the private nature of risk management, there is often little detail available on transactions, but Deutsche has been involved in several innovations. It bought a significant portfolio of airline leases from a Nordic client to enhance the post-tax return of the seller and reduce the capital tied up; it sold a company with profits in it to a new corporate entity wishing to purchase large capital goods and restructured the business to use the taxable profit to offset against the new asset depreciations. It has also developed a unique rate management solution called the Term Premium Retriever that enables Nordic corporates to hedge their exposure to rising rates without incurring the negative carry induced by the positive term premium.
In investor services, SEB has been not only the best but also the most improved operator in the market. It has been highly active in creating platforms and solutions around the proposed merger of the Finnish and Swedish stock exchanges and the broader evolving pan-Nordic environment. Evidence of this dedication to innovation include SEB’s co-operation with OMHEX to provide Swedish/Finnish integrated custody and broker/dealer services, and their continuing drive to build the Nordic Processing Utility to create a competitor-neutral regional processing engine to serve all the big banks and processing institutions. SEB also strengthened its operations in Finland by acquiring OMX’s custodian client business.
This year, Suprema Securities, part of the privately held Evli Group of Finland since October 2002, wins a special award as the best smaller bank in the Baltic republics. Estonia, Latvia and Lithuania are growing rapidly and Suprema has grown with them: on the Tallinn stock exchange it has increased its market share of trading from 26.5% to 64.4% in a year, in Vilnius from 5.2% to 15.9% and in Riga its market share is now 41%. In these markets, with the exception of Vilnius, Suprema is the clear market leader. And with all the Baltic exchanges now owned by Sweden’s OMX and linked together, and with Sweden, therefore increasing liquidity, Suprema looks set to grow further.
Suprema is no slouch in primary market activity either and is a leading player in regional M&A. In May 2004 the bank completed the IPO of wireless equipment manufacturer SAF Tehnika: the first private company to list in the region since 1997 and the first IPO since a privatization in 2002. Although other IPOs have taken some time to follow SAF’s €25.8 million flotation – it was the only international IPO from the Baltic republics in 2004 – there is now a good pipeline of IPOs in Estonia, Lithuania and Latvia. And Suprema is uniquely placed to benefit. Crucially, it is also active in private equity, meaning it has the potential to create its own supply of deals.
And where there are large deals to be done, the market turns to Suprema. In March, it executed the largest capital market transaction in the Baltic republics to date, with a €403 million trade in Hansabank shares. The trade was part of the ultimately successful takeover of Hansabank by Swedbank and was sold by an undisclosed party. Suprema continues to innovate. It recently launched a collaboration with E*Trade, making it easier to trade on international financial markets for Estonian investors.
