Nordic Private Banking Goes Green

Swedbank, Nordea and Danske Bank are hoping new tech and green-investment offerings can power them past a money-laundering scandal.

von Koskull, Nordea

The ultrarich don’t necessarily mind a scandal—unless it’s a scandal involving money and their bank. Leading Nordic lenders Swedbank, Nordea and Danske Bank, currently embroiled in far-reaching probes of suspected money-laundering at their Baltic state branches, are battling to protect their private-banking business, retain increasingly nervous (and publicity-shy) clients and sustain their reputations and market share.

All three are working to reengage their audiences by reinforcing the product and management sides of their wealth operations. The most noticeable strategic shift is a move to increase their range of green fund investments while growing the technology fund side of their portfolios. Much is riding on the success of these initiatives, as the stress load from the ongoing investigations shows up in the banks’ fiscal results.

Key shareholders in Nordea, such as Sampo Fund Management and Cevian Capital, are unhappy about the bank’s growth strategies against the backdrop of weaker-than-anticipated first-quarter profits. CEO Casper von Koskull has asked investors for more time to implement a range of profit-enhancement measures. “We are meeting our target to reduce structural costs and improve our top-line performance,” he says. “What we need now is more momentum.” Danske and Swedbank are also showing weakened profitability.

Nordea, the leading corporate and investment bank in the region, has in recent years delivered the highest private banking client satisfaction of the Nordic Big Three—beaten only by smaller rivals Nykredit and Sydbank. But to retain this status, the bank must continue to “raise the bar,” says Michael Zeier, global co-head of Nordea’s Corporate and Investment Banking. “We intend to work more closely with our whole value chain to remain the leading player in the Nordics,” he adds.

In March, Nordea Asset Management formed a joint venture with Jan Ståhlberg, a private equity (PE) specialist. The new Trill Impact fund will invest in unlisted public companies that meet targets linked to the UN Sustainable Development Goals, responding to rising interest among Nordea’s private customers for new investment options in sustainable PE projects.

Nordea is also reorganizing investment activities in its $360 billion-plus wealth unit. At the end of 2017, it streamlined its Nordic pension business by selling a 45% share in Nordea Liv & Pension Denmark. The divestment earned Nordea a net gain of over $180 million. A primary driver behind the reorganization was Nordea’s ambition to achieve a long-term target in net flow growth of over 5% in 2019.

Meanwhile, Swedbank’s wealth arm, Swedbank Robur, has adopted a high-value tech-investment approach to growing its business. In the last six months it has revitalized the senior portfolio management teams at its technology and small enterprise funds, Swedbank Robur Ny Teknik and Swedbank Robur Småbolagsfond Norden.

“The team-strengthening and new hires bolster our global fund management generally, and our Nordic fund management in particular,” says Stefan Sundblom, head of Equities at Swedbank Robur. Swedbank has been aggressively growing the private-banking group domain since 2016, and its customer base now comprises almost 7.7 million private customers and over 610,000 corporate and organizational customers across the Nordic-Baltic states and Europe.

With $140 billion of managed assets in over 90 different funds, Swedbank is also expanding its private investment, mutual fund and hedge fund presence—both offerings and services—in North America, South Africa, Europe and China. The bank aims to use this global network to add green and sustainable energy offerings to rake in new private customers.

Danske Bank is relying on innovation to grow its private customer base, in this case via rollout of green offerings. In March, the bank’s mortgage subsidiary, Realkredit Danmark, launched green mortgage loans and bonds targeting commercial customers looking to fund climate-friendly projects. The tech focus is also reflected in Danske Bank’s appetite for next-generation investments in advanced technology. Its latest major equity buy-in was a significant stake in the $120 million venture fund launched in April by Denmark-based byFounders, which specializes in acquiring strong equity positions in Nordic IT, robotics and artificial-intelligence innovators and startups.

“Investments in funds like byFounders help us gain a deeper insight into the newest technologies and business models within and outside the fintech community,” says Frederik Gjessing Vinten, head of Group Development at Danske Bank.