Nordea Bank AB is telling clients to rest assured Scandinavia’s biggest lender will dominate underwriting in the region’s fledgling corporate debt market.
“We’re the leading bank in each of the Nordic markets, which means, per default, that we have to be the leading finance and bond house in the region,” Casper von Koskull, head of wholesale banking at the Stockholm-based bank, said yesterday in an interview. “It’s a business opportunity as well as an obligation to our clients.”
Nordea topped last year’s ranking of Scandinavian underwriters of corporate bonds, followed by SEB AB and Danske Bank A/S, according to data compiled by Bloomberg. This year, it’s slipped down the chart to be overtaken by SEB, which reclaimed the underwriting supremacy it enjoyed in 2011.
Banks are fighting for dominance in a market that promises to free up their balance sheets from regulatory capital requirements while generating lucrative fees from companies eager for funds. Nordea Chief Executive Officer Christian Clausen, who is also the president of the European Banking Federation, has urged lenders to target “capital light” business models in response to stricter global requirements.
Nordea underwrote $6.6 billion of the $50.5 billion in non-financial corporate debt issued in Scandinavia in 2012, according to data compiled by Bloomberg. This year, the bank has arranged debt sales equivalent to $2.4 billion, 14 percent less than SEB.
“I’m not driving lending away from our balance sheet into bonds,” Koskull said. “I want to be able to do both and use them as complements. We’ll continue to do both, depending on what serves the client best rather than saying I need the bond to improve my balance sheet.”
As companies in the region respond to a lack of bank credit, local lenders are winning more business than their international rivals. Sweden’s four biggest banks arranged about three-quarters of the debt sold by non-financial firms in the largest Nordic economy last year, according to data compiled by Bloomberg.
The top-ranked global underwriter in 2012, JPMorgan Chase & Co., saw the number of bond issues in Sweden fall in 2012 to four from 10 a year earlier. Underwriting at Sweden’s four biggest banks rose 33 percent in the same period. This year, Royal Bank of Scotland Group Plc was the highest-ranked non-Nordic bank to underwrite debt in the region, followed by JPMorgan, data compiled by Bloomberg show.
Demand for high-yielding debt sold by companies based in Scandinavia’s AAA rated economies is growing, according to ING Investment Management. Issuers can’t print bonds fast enough to satisfy investors, Timothy Dowling, lead manager of ING’s global high-yield portfolio, said in an interview this month.
The region is stepping up efforts to accommodate the trend and bring investors and issuers together. In Sweden, securities dealers are creating a new framework due to be completed next month for the country’s high-yield debt market. The goal is to add protection for bondholders and stimulate demand. In Denmark, the government is working on a plan to allow banks to bundle and sell small and medium-sized companies’ debt to boost liquidity.
Corporate issuance in Norway jumped last year to a record 96 billion kroner, according to Nordea. To aid transparency, Norway’s Fund and Asset Management Association and the Norwegian Trustee, which acts as an agent for investors, said last month they will set up a pricing service for bonds.
Investors inside the region are also looking at corporate bonds as an alternative to stocks, Koskull said.
“Swedish investors are moving away from a strong equity weighting and are starting to build more credit and fixed income portfolios, which is one of the interest trends we’ve seen in the region,” he said. “The Danish bond market was the last one to take off, but it’s just another result of investors looking for diversification and yield.”
Nordea is “bullish on debt markets” and “much less so on equities and initial public offerings,” Koskull said.