Being Swedish Proving Too Costly for Biggest Nordic Bank

  • Wahlroos rebuffed by Dutch after seeking ABN Amro merger
  • Sweden stands by planned financial tax, strict capital rules

Scandinavia’s biggest bank is looking for a way out. Either from Sweden, or from regulations and taxes it doesn’t like.

Nordea Bank AB Chairman Bjoern Wahlroos, who said last year he might move parts of the bank away from its home country, has been seeking to merge with ABN Amro Group NV in a way that could have let it incorporate in the Netherlands. The Dutch government, which holds almost 80 percent of ABN Amro, wasn’t interested, a person familiar with the talks said Thursday.

Bjoern Wahlroos

Photographer: Casper Hedberg/Bloomberg

Wahlroos had proposed a share exchange whose structure might have let the Nordic region’s biggest bank escape Sweden’s capital rules, among the world’s strictest. The news surfaced as Sweden’s government said it won’t back down from a plan to impose a new financial tax. Bankers in the Nordic country say the proposal puts 16,000 Swedish financial jobs at risk, and Wahlroos has been a vocal opponent of the levy.

Nordea, ABN Amro and the Dutch and Swedish governments all declined to comment. But from what is known of the proposed merger, there’s a good deal of politics involved.

“It’s a message to regulators that are overly onerous,” Karl Morris, an analyst at Keefe, Bruyette & Woods in London, said in an interview. “At some point it can become untenable for a lot of firms and may force them to consider where they want to be based.”

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Nordea’s latest quarterly numbers show the bank fell short of new, stricter requirements set by its regulator. The bank in August became the first in the region to sell off some of the risk in its portfolio in an effort to build up its regulatory buffers.

Morris also suggested in a note that the Nordea chairman might have acted without the participation of the bank’s management. Chief Executive Officer, Casper von Koskull said in a statement Friday that Nordea’s “only focus is on the ongoing transformation within Nordea.” He declined to comment on the reported merger talks.

Wahlroos has a history of colorful behavior. In 2015, he was quoted in various Danish media for his comments while attending an event arranged by pension fund PFA: “I’ll probably offend some people. But about 80 percent of people are idiots. At least when it comes to money.” He described the financial industry as the “tunnel” that takes money from “idiots” and transfers it to the remaining 20 percent, which he said is “better with money.” The process benefits everyone involved, he said.

Looking Elsewhere

Wahlroos’s interest in moving elsewhere is a recurring theme among most analysts trying to interpret the Nordea chairman’s reported bid for ABN Amro.

“The proposal was mainly motivated by regulatory arbitrage reasons, with Nordea seeking to be regulated by the ECB rather than the Swedish regulator,” Benoit Petrarque, an analyst at Kepler Cheuvreux, said in a note to clients on Friday. “We believe there are no obvious synergies except in support functions as well as some in specialized industry lending.”

Morris at KBW said it’s quite likely that Wahlroos “probably made an opportunistic bid and went in knowing he had nothing to lose” if he was rejected by the Dutch government. But it’s worth noting that the Nordea chairman is “an incredibly astute player of chess in financial markets.”

For the government’s part, Financial Markets Minister Per Bolund was adamant earlier in the week that planned taxes targeting the industry are going ahead. He said bankers’ concerns were “exaggerated” and urged the industry to wait for the government’s final proposal before assuming the worst.

Playing Field

Ultimately, the idea of Nordea using ABN Amro to escape stricter capital rules is “pretty far-fetched,” according to Morris at KBW. That’s because the Swedish regulator would be likely to insist on a level playing field for any branches operating under its jurisdiction.

Nordea, which has branches in Denmark, Sweden, Finland, Norway, Latvia, Lithuania, Estonia and Russia, is the product of a series of pan-Nordic mergers in the aftermath of the region’s financial crisis in the 1990s. The bank is currently switching its subsidiary network into a branch structure that will be answerable to Sweden’s regulator.

The Dutch government stepped in to rescue ABN Amro in 2008, a year after it was bought by a consortium of three banks in the largest financial-services takeover ever. A Nordea-ABN Amro deal would be the biggest bank merger in Europe since that deal. Under government ownership, ABN Amro became a consumer lender primarily focused on the Netherlands.

Barely Recovered

Dutch Finance Minister Jeroen Dijsselbloem said in May that he aimed to sell the rest of the government’s stake in the bank at a “good price” to recover its investment. The Netherlands spent about 22 billion euros ($24.6 billion) on ABN Amro, recouping 3.8 billion euros in the initial public offering.

“Dijsselbloem would never allow ABN Amro to merge with a foreign bank looking to flee its own regulatory regime,” Jos Versteeg, an analyst at Theodoor Gilissen Bankiers NV in Amsterdam, said by phone. “The Netherlands has barely recovered from ABN Amro’s last adventure with banks from abroad.”

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