Nordea bank branch at night

Norwegian banks dominate several best-performing categories, while two Swedish banks have different stories to tell in this year’s top Nordic bank rankings. Anita Hawser reports. 

While Norwegian banks have performed well in this year’s rankings, two Swedish banks stand out in The Banker’s Top 30 Nordic Banks ranking by Tier 1 capital and best-performing categories — though for different reasons.

The first is consumer loan and non-standard mortgage specialist Nordax Bank. While it fell short of the top 10 overall best-performing Nordic banks last year, it has made its presence felt in several best-performing categories.

Nordax Bank takes first place in overall performance, with a score of 5.48. It has also secured the accolade of best-performing bank for growth with a score of 5.05, having placed second last year (with a higher score of 9.15). This year, the bank ranks second for profitability and operational efficiency, and makes it into the top 10 for return on risk.

It has also achieved one of only two higher scores awarded for operational efficiency at 8.42, putting it in second place behind Finland’s Savings Bank Group (with a score of 8.93). However, overall performance scores are down this year for the cohort as a whole, compared to last year, with no banks receiving a perfect 10.

In November 2022, Nordax Bank completed its merger with Bank Norwegian, which created the largest independent specialist consumer finance lender in the Nordics (the bank plans to change its name to Noba Bank to reflect the combined brands). The Swedish bank saw strong growth in personal lending in 2022, with total lending as at December 31 amounting to SKr88.8bn ($8.6bn) compared to SKr70.7bn as at December 31, 2021, according to its 2022 interim results.

The bank says that around 85% of growth in its lending business has been driven by increased sales and about 15% by currency effects. Portfolios of private loans and credit cards have also demonstrated good growth, with total volume of personal loans and credit cards amounting to SKr73bn, compared to SKr58bn as at December 31, 2021.

Merger benefits

Nordic Credit Rating says the Bank Norwegian acquisition continues to provide benefits for Nordax in terms of scale and improved earnings capacity — although these factors are partly offset by the higher risk profile of the acquired loan book and high projected loan growth.

“We anticipate that the resulting added value will increase gradually as additional synergies and capital improvements are achieved,” the agency said in a November 2022 rating action report. “We believe Nordax Bank will prove resilient to an economic downturn as we expect its earnings to remain strong on the back of rising interest rates.”

Conversely, Swedish compatriot Klarna Bank has seen its position in the Top 30 Nordic Banks ranking, based on Tier 1 capital, fall from 15th place in 2022 to 24th place this year, with the buy now, pay later (BNPL) specialist seeing its Tier 1 capital at year-end 2022 plunge by more than 42%. While Tier 1 capital has declined for all Nordic banks bar two in this year’s top 30 list, Klarna Bank’s decline is by far the greatest (42.5%). It has also recorded the second biggest fall in pre-tax profits (34.8%).

Last year, Klarna Bank was ranked first for soundness with a score of 9.64. But this year it has plummeted to 30th place, with a score of just 3.25. In the leverage category, Klarna has fallen from first last year with a perfect score of 10 to a rank of 30 this year with a score of 2.45.

The past three years have seen the BNPL specialist’s profitability take a hit as it expanded into the US market, which in December 2022, became its largest market by revenue. In 2022, Klarna’s valuation was slashed by more than 80% from its peak, as the hype around BNPL dissipated. While fourth-quarter 2022 revenues were up 20% compared to the same period the previous year, pre-tax earnings for the period fell by 43%.

Bank health

Norwegian banks dominate several of the performance categories. Norway has five banks (SpareBank 1 Sørøst Norge, DNB Group, Sparebanken Vest, SpareBank 1 SMN and SpareBank 1 Østlandet) in the top 10 overall. In addition, Denmark has two banks, whereas Sweden, Finland and Iceland have one a piece.

Norwegian lenders also stand out in the top 10 banks for growth, profitability, asset quality and soundness. Although the country’s economic outlook deteriorated throughout 2022, Nordic Credit Rating says Norway’s mid-size savings banks had not shown any material increase in losses and the Norwegian economy remains relatively healthy.

Five Danish banks have placed in the top 10 for liquidity: Sydbank, Arbejdernes Landsbank, Spar Nord Bank, Jyske Bank and Danske Bank. Iceland’s three major banks – Landsbankinn, Arion Bank and Islandsbanki – feature prominently in the top 10 best-performing banks for asset quality and soundness. But despite having taken the overall top spot in the Nordics last year, Landsbankinn does not feature at all in this year’s overall top 10 list.

Nordic economies are expected to withstand the ‘triple whammy’ of the energy crisis, high inflation and aggressive interest rate hike cycle better than most of their European peers, according to analysts. However, property risk among Nordic banks is rising, says Fitch Ratings, with housing and commercial real estate loans — two markets that are likely to be adversely impacted by inflation and high interest rates — dominating loan books at Nordic banks, specifically large Swedish lenders.


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