The Nordic region is chronically overbanked. Denmark's five million population alone is served by almost 40 listed banks. The sector is a tangle of cooperative banks, savings banks, small and medium-size domestic players and a handful of larger institutions with a variety of cross-border interests. Last year's merger of Finland's Merita and Sweden's Nordbanken created the region's largest bank but with €12 billion ($13 billion) market capitalization it still doesn't make Europe's top 20. The rest are tiny. SEB and Den Danske have market caps roughly half the size; Unidanmark, BG Bank, Den norske and Christiania Bank combined are smaller than MeritaNordbanken.
MeritaNordbanken's decision to join forces was driven by recognition of the economies of scale that a merger could produce - in particular those associated with information technology. "Information technology is an increasingly important means of competition among banks, and banks will need to invest heavily in IT over the coming years," says MeritaNordbanken's chairman, Vesa Vainio. "The cost of IT is more or less fixed, so leveraging the investment on a larger customer base lowers the per unit cost. That will be to our advantage as we look to improve earnings through being a leader in IT development."