Best-performing Nordic Banks 2020: a region in robust health

These have been testing times for Nordic banks. Money-laundering scandals have rocked a number of lenders across the region in recent years, denting the sector’s reputation around the world.

These troubles have incurred sizeable penalties for some banks, just as the global economy is set to experience its worst downturn since the Great Depression. And though the Nordic economies have, until now, displayed sound resilience by posting healthy growth rates, their exposure to the global economy leaves them vulnerable to developments beyond their borders.

Despite these challenges, however, The Banker’s Top Nordic Banks ranking offers a glimpse of a regional banking sector that is, on the whole, both strong and profitable. The ranking, which includes a breakdown of banks by their Tier 1 capital positions, as well as an analysis of the best-performing lenders based on other metrics, including profitability, asset quality and liquidity, is the first of its kind for the region published by The Banker. 

Norwegian power

Notably, Norwegian banks have emerged as the dominant force in this edition. Out of the 10 overall best-performing banks from the region, Norwegian lenders account for eight. Sparebank 1 Nord Norge, a member of the SpareBank 1 alliance of savings banks, secures first place. It also tops the profitability and return on risk rankings. Headquartered in Tromsø, the lender serves northern Norway through a network of 38 offices across 36 municipalities.

Other constituent members of the alliance, including SpareBank 1 SMN, SpareBank 1 Østlandet and SpareBank 1 SR Bank, secure the third, fourth and sixth places, respectively, among the best-performing banks. 

The only non-Norwegian lenders to feature among the overall best-performing banks are Denmark’s Ringkjøbing Landobank in second place, and Iceland’s Landsbankinn in seventh. Though the Danish bank is one of the country’s smaller institutions by total assets, it features prominently across several other best-performance rankings, landing second position in the top 10 banks by growth, profitability and operational efficiency. Meanwhile, Lansbankinn secures first place among the top 10 banks based on their capital assets ratio (soundness). 

Swedish quality

Though Swedish banks feature less frequently among the region’s best-performing lenders, they score particularly well in terms of asset quality. Sparbanken Skåne and Landshypotek Bank secure first and second place, respectively, among the top 10 banks based on this metric, while two other Swedish banks, Svenska Handelsbanken and Länsförsäkringar Bank, round out the table in ninth and 10th position. Elsewhere, SEB Group and Swedbank secure a respective fifth and sixth position among the top banks based on their liquidity positions.

Nevertheless, in the liquidity stakes it is the Danish banks that are dominant. In particular, Sydbank, which takes first place, is followed by three of its compatriots to secure the top four positions in this table. Another Danish lender, Jyske Bank, is eighth, leaving banks from Sweden, Norway and Finland to round out the remaining places. In terms of bank profitability, it is an exclusively Scandinavian affair. Lenders from Norway, Sweden and Denmark complete this table, with Norwegian banks occupying six out of 10 places. 

Danish and Norwegian lenders collectively account for nine out of the top 10 in terms of growth, which covers the annual percentage increase of loans, deposits, assets and operating income. Denmark’s Saxo Bank Group tops this ranking, with three other Danish banks also making the cut. All but one of the Norwegian institutions featured in the growth ranking – Sparebanken Møre, in fourth place – are members of the SpareBank 1 alliance. Meanwhile, Finland’s Savings Bank Group secures third position in this list. 

Efficiency drive

When it comes to operational efficiency, the metric which analyses the annual basis point change in banks’ cost-to-income ratios, all but three lenders hail from Norway. Given that Nordic banks have earned a reputation for strong cost-to-income ratios in recent years, helped by steady profits and disciplined cost structures, it is notable that a single market from the region has dominated this table. 

Topping this ranking is Norway’s Sparebanken Vest, followed closely by two Danish banks, Ringkjøbing Landbobank in second place and Nykredit in third position. The only other non-Norwegian lender to feature in this table is Iceland’s Landsbankinn in ninth place. 

Given that economic conditions across Europe are expected to deteriorate in 2020, these results demonstrate that Norwegian lenders are in a particularly good position to weather the coming storm. Nevertheless, many of Norway’s regional lenders will be helped by the fact that their physical footprint remains relatively small compared with larger banks from other markets. Looking ahead, it is also worth noting that, on the whole, Nordic lenders have developed some of the most comprehensive digital banking offerings available in Europe today. As a result, customer use of bank branches has declined precipitously, while digital engagement exceeds most other regional banking markets. This means that the operational efficiency ranking could be subject to significant shifts in the coming years, as consumer patterns change and banks’ ongoing digital investment plans bear greater fruit across the region. 

Meanwhile, the top 10 banks by return on risk reveals a similar pattern of Norwegian dominance. Once again, all but three lenders hail from Norway. SpareBank 1 Nord Norge and SpareBank 1 SMN top the ranking in first and second place respectively. Beyond this, Sweden’s Swedbank takes third place in the ranking, while Denmark’s Ringkjøbing Landbobank and SEB Group from Sweden secure eighth and ninth place respectively. 

The top 10 banks by leverage ranking is one metric that offers a strong degree of diversity in terms of regional banking representation. Though five lenders from Norway feature in this table, they are accompanied by three Icelandic banks and two Danish institutions. Topping the table is Arion Bank from Iceland, while compatriot Landsbankinn secures second place. Ringkjøbing Landbobank, from Denmark, takes fourth place while another Danish lender, Sydbank, lands at position eight. The highest ranking Norwegian lender, Santander Consumer Bank Nordic, comes in third on the table. 

Finnish capital

In the main ranking of banks by Tier 1 capital, Finland’s Nordea Group is the largest bank with $30.92bn by the end of the 2019 review period. Denmark’s Danske Bank secures a distant second place with $23.44bn, closely followed by Norway’s DNB Group with $22.85bn. Of the remaining banks in the top 10, three hail from Sweden, two are from Denmark and one each comes from Norway and Finland. Meanwhile, among all the banks featured in the main ranking, the largest increases to Tier 1 capital over 2019 were registered by Denmark’s Saxo Bank Group with 12.2% growth, along with Norway’s Santander Consumer Bank Nordic with 10.87% growth. 

The Banker’s Top Nordic Banks ranking points to a sector that, despite recent troubles, is in relatively good shape. This is just as well. The fallout from the Covid-19 pandemic is likely to push banks around the world to their limits. But markets across the Nordic region can at least take comfort from the fact that their banking systems are better placed than most to contend with the coming challenges.