Evaluating the Nordea experiment: Evidence from market and accounting data

This paper discusses results and difficulties of comparing banks' performance based on publicly available data for the case of Nordea, a pan-Nordic bank created through mergers of important national banks. The objective is to determine whether Nordea's unique strategy of functional integration across four countries can be advantageous. For stock-market data, however, Nordea does not have stable betas on risk factors, and thus the comparables method must be used with great care. The Nordea holding company performed about as well as the comparables, both in terms of stock-market and accounting data. Nordea banks in individual countries outperformed comparable holding companies; by arithmetic, Nordea non-bank operations are not as profitable as its bank operations. In event studies, the data lend only the weakest support to the hypothesis that the market viewed Nordea's acquisitions as adding value.