Nordea has become the first bank anywhere to completely outsource its company equity research. It is unlikely to be the last. The pan-Nordic bank is to cease its own coverage of stocks in the Nordic region and will instead buy research on 200 regional stocks, including buy, sell and hold recommendations, from Standard & Poor's. This follows a similar deal with S&P last year in which Nordea outsourced all its US, European and Asian company equity research coverage to the US group.
Under the terms of the five-year deal, S&P will establish a 20-strong research team in Stockholm and will be barred from agreeing any similar deal with another bank in the region. Nordea will also get access to all S&P's equity products including its database and industry surveys. In total, S&P will provide research on 1,700 companies. It will be paid a quarterly fee, with a bonus linked to the performance of recommendations.
Although Nordea will outsource all its company equity research, it is also setting up a new internal research unit called Alpha Research Team. The team, which will bring together quantitative strategists and sector specialists, will work with the S&P analysts to generate more value-added research.