DNB, Norway’s biggest bank, suffered a humiliating barrage of fury earlier this month from potential customers at Sbanken who don’t want anything to do with it. DNB’s latest jump in pre-tax profits this week, however, could take the sting out of losing so many angry customer as DNB’s pending takeover of Sbanken seems set to proceed.
“We have good faith that this (the Sbanken acquistion) will go through,” said DNB’s chief executive Kjerstin Braathen just after releasing a 50.6 percent increase in first-quarter pre-tax earnings. The increase mostly reflected reversals of writedowns taken last year to cover expected losses that didn’t materialize: both revenues and operating results fell 14- and 25 percent respectively.
Those declines help explain why DNB is keen to take over the plucky and technically savvy Sbanken. It arguably needs Sbanken’s expertise more than its market share. Sbanken customers, however, don’t feel they need DNB and have, since the deal was announced earlier this month, been busy mounting what some have called a “PR catastrophe” for DNB. While some customers have been trying to buy up Sbanken shares themselves, to hinder a takeover, others have noisily been leaving Sbanken en masse. Other challengers like Bulder Bank and even the large Nordea have suddenly gained new customers from both Sbanken and DNB.
DNB’s Braathen has put up a brave face during all angry reaction but must have been shaken by the furious response to her bank’s NOK 11.1 billion bid for Sbanken. It was embarrassing for DNB when thousands of Sbanken customers, many of whom had once been DNB customers, publicly aired their complaints over DNB’s poor customer service on social media and vowed to go elsewhere.
‘Feels like a betrayal’
“The bank with the least satisfied customers buys up the bank with the most satisfied,” Kjersti Stuestøl, for example, told newspaper Dagens Næringsliv (DN). She’s among former DNB customers who’d moved over to Sbanken and has no intention of being under DNB’s control again. “It looks like DNB wants to improve its image by tapping into Sbanken’s customer satisfaction, but I don’t think it will work,” Stuestøl said. She was among many branding DNB as expensive and even arrogant: “For me, this feels like a betrayal. It seems like Sbanken has given up its vision of being the challenger, and that’s very disappointing.”
Remarks like that indicate just how unpopular DNB is. Braathen, though, seemed to take it all in stride, telling DN this week that she wasn’t surprised by the reaction. “We are a big player and they are a much smaller player that has built itself up from being a challenger.” Braathen went so far as to claim she found it “inspiring to see customers who are so concerned about their bank, and we allow ourselves to be motivated by that.”
Braathen claims Sbanken customers may find themselves positively surprised by what the two banks together could deliver: “I hope they can be patient with us and give us a chance to show what we can deliver.” She denied DNB was the wealthy player in the market trying to buy itself friends. She claimed recent surveys have showed rising customer satisfaction at DNB. She insisted DNB wasn’t trying to buy market share but rather the synergy between two banks that could complement each other.
DNB has long been Norway’s dominant bank, prompting DN‘s financial commentator Thor Christian Jensen to recently quip that there are three things the furious Sbanken customers can’t avoid: “death, taxes and DNB.” Both Jensen and many others view the pending merger as a “done deal,” contingent only on gaining approval from financial and competition authorities. Sbanken’s own major shareholders have already signalled they’ll sell out to DNB.
‘Thorough examination’ looms
Norway’s competition authority (Konkurransetilsynet) has promised “a thorough examination” of the proposed combination. Its director Lars Sørgard told DN he and his colleagues will especially study Sbanken’s ability to press down banking prices, how customers have moved to and from the two banks, and whether DNB can document that its takeover will benefit customers.
At least one profressor, Morten Kinander at the Norwegian Business School BI, has voiced opposition to the deal. He thinks it will lead to higher fees for the banks’ customers. He also thinks DNB’s position in the market is already “problematically large.” Morten Andreas Meyer, secretary general of the homeowners’ organization Huseierne, also opposes the deal, writing in a recent commentary that “all Norwegian bank customers will lose if the authorities approve DNB’s acquisition.”
Braathen remains optimistic. “We have a solid position already,” she told DN, and we’re very humble as (Sbanken) shareholders make their own evaluations.” She thinks all authorities involved will approve the deal and so do DN commentators: Despite the “extraordinary engagement” of Sbanken customers (6,500 had signaled opposition to the deal as of Thursday), DN editorialized Friday that there are 138 banks to choose from in the Norwegian market, 68 of them independent like Sbanken has been. Some even offer lower interest rates on mortgages and higher rates on savings than Sbanken.
It remained unclear when the authorities’ decisions will be made.