DNB and Nordea to merge IT operations for Baltic super bank

Two Nordic financial services giants, Norway’s DNB and Sweden’s Nordea, are joining forces to scale up operations in the Baltics, seeing joint IT as an important advantage.

The duo have announced plans to merge their banking operations across Estonia, Latvia and Lithuania into a new combined bank. This will bring IT consolidation and investment in digital services, Inga Skisaker, head of banking, Baltic countries at Nordea, told Computer Weekly.

“Scale is key in banking today, with larger banks making more efficient use of resources,” said Skisaker. “Together with DNB, we will have the scale, stronger geographic presence and a broader product offering, enabling us to become the main bank for customers in the Baltic.”

The as-yet unnamed joint venture is still subject to regulatory approval, but the banks expect to complete the deal in the second quarter of 2017. According to Nordea, the combined company would become the second largest bank in the Baltics for lending, with a combined lending portfolio of €13bn and combined market share of 26%.

They plan to register the new combined bank in Estonia and operate branches in Latvia and Lithuania. Potential staff changes are still under wraps, but Nordea and DNB currently employ 1,300 and 1,800 staff, respectively, across the Baltic countries.

The two banks describe their positions in the Baltics as complementary. While DNB is said to be strong among small and medium-sized enterprises, Nordea has seen growth within large businesses.

But they are not the only Nordic players in the region, with Sweden’s Swedbank and SEB holding major shares of the Baltic market.

Although details of the combined bank’s operations are yet to be finalised, Nordea and DNB have highlighted IT as a key source of synergy. Integration will be needed because the banks currently use different systems from multiple suppliers.

“Our ultimate goal is to consolidate our IT platform and invest more in digital offerings for our customers,” said Skisaker. “We have a clear opportunity to create a modern bank offering the digital services our customers want.”

The two banks emphasise the “digital thinking” of the combined business and its ability to move quickly to develop new products and services. Atle Knai, head of DNB’s Baltic division, describes digitalisation as one of the greatest challenges for the new bank, as well as for the European banking industry in general.

“We are living in times of a digital revolution,” he said. “An increasing part of daily banking operations is already done via e-channels. We are expanding our cashless branch network and working on new e-solutions for our clients. Joining forces will boost this process because we will have larger scale and the ability to invest in modern solutions.”

Both Nordea and DNB both have a major focus on digitalisation and financial technology. Nordea is in the middle of investing €1bn in IT transformation and simplification, including core banking and payments systems.

Meanwhile, DNB has reacted to its customers moving online by closing down 59 branches in Norway and increasing its focus on digital development.

Nordea and DNB will have equal voting rights in the new Baltic bank, but their share of ownership will reflect the relative equity value of their contributions when the deal is closed. In the meantime, both banks will continue their independent operations in the Baltics.