The two largest locally owned banks in Norway, DnB Group and Gjensidige NOR, have vowed to fight the Norwegian Competition Authority’s preliminary ruling against their planned merger.
“We are convinced the merger will be in the best interests of our customers and that it will thus be approved and implemented after consideration by all relevant government authorities,” said group chief executives Olav Hytta and Svein Aaser, in a joint statement. “This is the last chance to establish a financial services group based in Norway that is able to meet the growing competition in the Nordic financial sector and has the necessary strength to ensure that important decisions concerning Norwegian companies and households will still be made in Norway.’’
The NCA says the merged entity, DnB NOR, will significantly restrict competition in loans to private customers, small and medium-sized businesses, pension plans, payment services, loans to other banks, leasing and factoring, where it will generally have market shares above 50%. It also noted low customer mobility, the possibility of an increase in the net interest margin for loans and that the merged bank would have an active customer relationship with up to 70% of Norway’s population.
The merger would create a dominant Norwegian banking champion. It is believed the government, which can overrule the competition authorities, is in favour of the deal.
In its judgment, the NCA also said it would “consider whether any commitments by the parties to modify the merger could eliminate concerns regarding competition resulting from the merger’’.
The banks are now planning to respond to the NCA with objections and possible modifications to the merger agreement by September 19. The competition authorities then have until November 19 to determine the final judgment.
The banks have already made public future management roles and the business groups that will be created in the merger.
Like most banks in the country, both posted a fall in profits in 2002. DnB Group saw pre-tax profits fall 30% to $469m on assets of $55,304m, while Gjensidige NOR saw pre-tax profits fall 24% to $321m on assets of $36,420m. Both have cost/income ratios of more than 60%, which could be cut if the merger went through.
