Wednesday, July 08, 2020

Wall Street targets the Nordics after latest spike in wealth

Feb 19. 2020
Pedestrians cross tramlines in Helsinki, Finland, on Feb. 6, 2020. MUST CREDIT: Bloomberg photo by Maija Astikainen.
Pedestrians cross tramlines in Helsinki, Finland, on Feb. 6, 2020. MUST CREDIT: Bloomberg photo by Maija Astikainen.
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By Syndication Washington Post, Bloomberg · Frances Schwartzkopff, Hanna Hoikkala · BUSINESS, WORLD, US-GLOBAL-MARKETS, EUROPE 

One of the world's richest corners has become a magnet for a growing number of Wall Street firms.

The Nordic countries -- best known for their universal welfare models and domination of world happiness rankings -- now have a surplus of cash after years of central bank stimulus. That's prompting banks from across the globe to line up with advice on everything from money management to mergers and acquisitions.

JPMorgan Chase, Goldman Sachs and BNP Paribas have all recently announced they're either expanding existing operations or creating new offices in the Nordic region. Many of them are interested in hiring locally to build their presence.

"We see an opportunity locally to grow our investment banking and private banking business organically," said Klaus Thune, co-head of Nordic banking at JPMorgan, which has about 40 bankers in London handling the Nordic corporate market. He also says that "there are a lot of new M&A mandates coming through."

Eirik Winter, chief executive officer in the Nordics at BNP Paribas, says the region's appeal lies in its "tendency to grow a bit faster than the rest of Europe and in some cases even faster than the U.S."

And big U.S.-based investment managers are also turning to the region. Neuberger Berman recently opened an office in Stockholm, while Nuveen added to its presence in Scandinavia by creating an office in Copenhagen.

JPMorgan says it's relocating bankers to the Nordic region. It also wants to hire as it tries to expand a portfolio of ultra-high net worth clients, and do more investment banking. Goldman Sachs, which already has a Nordic base in Stockholm, will open an office in Copenhagen in April, starting with around 10 people.

Pension funds in particular are desperate for investment ideas as entrenched negative rates and high stock valuations push the industry into increasingly risky corners of the asset market. Many are relying more than ever on so-called alternative investments, which tend to be illiquid and difficult to price.

The region has been able to amass its wealth despite having one of the world's highest tax burdens. It also boasts some of the smallest gaps between rich and not-so-rich, while GDP-per-capita rankings are some of the highest on the planet. The banks and asset managers Bloomberg spoke to also cited the region's stable political and regulatory environment, and a corporate landscape in which there's considerable appetite for debt issuance and M&A.

BNP, which employs around 800 people in the Nordics, hired several dozen people in the past year and a half. It wants to focus on "areas where we are less known, such as M&A, investment banking and in equity markets," Winter said. "We're not 'smile and dial' bankers who fly in for deals."

New York-based investment manager Neuberger Berman has seen its business in the Nordic region grow by more than 50% a year since 2005. It relied on flying bankers in and out of the region, but has now decided it needs an office in the Swedish capital.

"At the end of the day, we also need to have a few feet on the ground and not only operating from a hotel reception or a hotel lobby," Mark Oestergaard, head of the Nordic operations, said. "That is to signal to the clients that this is not just for a brief moment in time in the investment industry. This is for the long haul."

It's also worth noting that roughly a third of Nordic corporate deals involve a buyer outside the region, and in most cases that buyer will bring its own banks. The figure is even higher, when it comes to private-equity deals, according to Nordic Knowledge Partners.

"The more foreign interest in the market, the higher the share of global banks," NKP's chief executive officer, Andreas von Buchwald, said. "Typically buyers would want their Goldman Sachs, rather than depend entirely on local banks."

Meanwhile, some of the biggest Nordic banks are in the middle of sweeping cost-cut programs that are eating into personnel numbers.

Frank Vang-Jensen, the new CEO of Nordea Bank, has slashed the lender's wholesale operations after shareholders demanded bigger returns. The second-biggest Nordic lender, Danske Bank, has frozen headcount as it grapples with the consequences of a huge money-laundering scandal.

But Nordic banks are keen to hold on to their business, with the resources they have.

Nordea plans to increase its asset management operations by doubling inflows from pension funds, Snorre Storset, head of wealth management, said. He's also targeting private banking for growth, but points to the "tough competition" as "others also see that it's very attractive."

Danske wants "to show that we are a bank that can both provide solid investment advice and can provide clear and relevant perspectives on customers' financial opportunities in the light of their individual situation," according to John Poulsen, head of investments.

But according to Kristiina Hirva, a Helsinki-based attorney with DLA Piper, international banks with their sights set on the Nordics face few barriers.

"There are a lot of real estate transactions, a lot of M&A transactions," said Hirva, whose employer is among those to have expanded in the Nordics, and now has 450 lawyers in the Nordic region alone.

"At least at the moment there seems to be a place for all of them," she said. And that includes "new players in the sandbox."




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