Consolidation in the European banking industry

1

• Consolidation in the European banking industry
• Thorleif Krarup, Group CEO, Nordea
• Bankers Association for Finance and Trade
• 8 April 2002

2
Agenda

• Nordea - a short introduction
• Consolidation in the Nordic and European banking
  industry
• Scope of consolidation strategies and drivers of
  consolidation
• Different approaches to a merger process

3
Nordea in short

• Leading financial services group in the Nordic
  and Baltic Sea region and world leader in
  Internet banking
• Operating through four business areas Retail
  Banking, Asset
  Management Life and General Insurance
• 11 millions customers whereof nearly
  2.8
  millions are also e-customers
• 1,245 bank branches and 125 insurance
  centres
  in 22 countries - 39,700 employees
• Number one or number two position
  in
  most Nordic markets
• Share listed in Stockholm, Helsinki
  and
  Copenhagen

Finland
Sweden
Norway
Denmark
The Baltic states
Poland
4
Nordeas pan-Nordic platform - build from
consolidations
1995-1996
1997
1998
1999
2000 2001
Sweden



Finland
Denmark
Norway
CHRISTIANIA BANK OG KREDITKASSE
5
Top Nordic banks by market cap
Nordic market consolidation 1996 2002 Top 3
as of top 20 34 50 Top 5 as of top
30 53 68
EUR bn
March 2002
6
Nordic banking is generally a highly concentrated
market
Norway Retail loans Corporate
loans DnB 13 DnB 27 UBN 12 Nordea 23 Nordea 7
UBN 16
Finland Retail loans Corporate
loans Nordea 35 Nordea 47 OKO 35 Sampo 24 Sam
po 13 OKO 18
Denmark Retail loans Corporate
loans Danske 45 Danske 49 Nordea 23 Nordea 23
Jyske 6 Jyske 5
Sweden Retail loans Corporate
loans SHB 27 SHB 27 Swedbank 25 Nordea 21 Nor
dea 12 Swedbank 17
7
Domestic mergers and acquisitions will be
followed by cross-border transactions

• Regulators are unlikely to allow for further
  large intra-market consolidation
• Only small number of large pan-Nordic deals are
  likely to be permissible
• Significant domestic market share holders will
  have to look abroad
• Pan-Nordic model will be pursued more vigorously
  by those banks who lack critical mass outside
  their home market
• Major Nordic financial groups eye (North-)
  European expansion, yet most are still largely
  domestic companies

8
Top 25 European banks by market cap
EUR bn
March 2002
9
Consolidation activity in European banking
Volume USbn
Source Goldman Sachs
10
Scope of consolidation strategies

• In-market consolidation - National Champions
• Regional and cross-border
• European and/or global expansion

11
What is driving the consolidation in the banking
industry?

• Growth
• High growth outlook for personal long-term
  savings
• Proven success of the bancassurance model
• High market share in domestic markets is the
  catalyst for cross-border deals
• Competition - increasing
• Interest margins - decreasing
• Economies of scale and synergy opportunities
• Large customer base and distribution network
• Large cap advantages
• Deregulation of the financial markets and the Euro

12
Ingredients for success in consolidation
Home market strength

• Strong or leadership position in home market

13
Different approaches to a merger process
14

• Consolidation in the European banking industry
• Thorleif Krarup, Group CEO, Nordea
• Bankers Association for Finance and Trade
• 8 April 2002