Wednesday, 4 February 2009

Nationalizing Nordea?

"Jaakko Kiander, the director of the Labour Institute for Economic Research, proposes nationalising Nordea Bank.

In the SDP-affiliated publication Uutispäivä Demari he says a common Finnish and Swedish state bank could help the countries survive the economic crisis.

He also proposes that both governments significantly increase their holdings in the Nordic bank Nordea. Kiander says this would infuse the bank with new capital which it could use to grant loans.

We are hearing all around that the financial system in Finland is sound - which in no doubt, I entirely disagree, since their involvement in the Baltic Sea Region and their reckless lending in the past 4 years.

Russia, which economy is on free fall and have been devaluating their currency by about 30% or more.

Estonia, Latvia, Lithuania and all surrounding will most probably go through their first depression and social instability pushing default at historical high and putting into their knees all the involved banks that participated in the miracle turning to be a "monetary" mirage...

Now, if banks were all "sound", why would we here such political juggling which appear to be a way to prepare the public involvement, in one word: "lemon socialism"


Anonymous said...

In these pages in "key finanical figures" one can find data on the banks up to 2007.

As far as I can work out the meanings of the special business terms, at the end of 2007 Nordea had 41 000 million Euros depoisted into its accounts, but had lent out 55 100 million Euros to privates customers and businesses. These figures are about 1/3rd of the total assets/liablities shown on the balance sheet.

In the banking industry these figures seem to be conservative, but going into a time of financial uncertainaty they give me some reason for concern.


HousingFinland said...

I agree with you IslandCrow.

I think the worse for Nordic Banks are still ahead.

Phase 1: Situation Denial

Company will try to hold on their employee and only use temporary methods i.e reduce costs, travel ban, temporary lay off...

The psychology being that we have a normal cyclical reversal, capacity will be reduce, some light restructuring is needed.

I think they are fool and do not understand the severity of the crises.

Phase 2: Reality And A Panic Rush

Warning!! Please read the rest only if you are in a good health shape or if you have had one or two beer or if you are at work:

Companies realize that banks have their own problem and understand that the funding needed will not be provided to all by government.

A panic ensued, the weakest bank will fall, the most indebted company will fall.

A chain reaction is triggered.

Employment will fall drastically, something historic while unemployement will rise above 10 % (offset by a massive amount of people retire).

Government deficit hit a new record and beat the 1993 all time high. Less people contributing and more people on employment benefits.

The survival instinct revives, but too late...many company files for bankruptcy exacerbating the problem.

Banks have to be bailout/nationalize with tax payer money.

Housing? Who really think about buying a house when one just hope to keep its job...

That was the Doom Bada Boom scenario...Might or Might Not?, that is not the question, who cares about questions?, just be prepared for the best or the worse...a little bit in the same way the priest prepare you to be married...(A note of optimism: I think Marriage is tougher than an economical slump, as it may last much longer ;->)

Andrew said...

Nordea indicated October 23rd they are in a very strong position dispite exstreme market conditions.

They also indicated clearly that they are fully aware of where they are in this point of the economic cycle.

Specifically for the Baltics/Russia/Poland/other they said:

1. In the investor presentation their lending in the Baltics etc is quite small compared to their overall loan book. For example:

Out of total corporate lending per industry of 155.5B

Real estate industry lending is 24.8% of total corporate lending.

Place vol commercial% Residential%
Sweden 15.2 44 56
Norway 9.4 72 28
Finland 7.0 49 51
Denmark 4.6 60 40
Baltics 1.1 75 25
Russia 0.5 100%
Poland .3 61 39
Other 0.6
Total 38.6 55 45

so Baltics is 1.1/38.6 of 24% or corporate lending

In their main media and analyst presentation they added:

2. The total loan loss for 2008 of *all* lending to *all* countries was a tiny 0.08% (8 basis points)of the loan book

3. Of the 156B corporate loan book 1 billion impaired loans *still* performing
670 million none performing

17% increase impaired loans mainly from baltics

2.7% of total portfolio is to Baltics. 25% of Baltic exposure is to nordic companies operating in baltics.

I took some more notes from the presentation.

"strong q3 2008 result

exstreme market conditions.

profits before loan losses slightly up.

Slightly lower profit after loan losses

(I am assuming this means after loan loss provisioning as if they have lost the loans that are not fully performing since the overall loan loss is very tiny)

8 basis points of loan loss to total lending

plenty of good funding coming in.

strong increase in deposits

customers moved from equity investments to deposits.

Nordea attracted long term funding even in September 2008 of 2b

Nordea able to tap short term wholesale markets in October at near libor.

Total external funding of 276billion of which 51% from public 20% from covered bonds


Baltic loan losses very low so far. Provisioning for much higher loss."

Nordea report full results Tuesday. Based on what they have said so far they will report less profit but solid results in challenging markets.

HousingFinland said...

Hi Andrew,

Thanks for the very accurate figures. It could be good to have you publish some article in that blogs as it could bring some balance and create a bull/bear clash view.

I think it will be interesting. Let me know if you are interested, and if you have time to write something here, obviously.

In my view, Nordea will have to increase their provisioning amid an atmosphere of lowering risks.

The result will be that they will lend less and ironically, at the same time, consumers will take less debt, whatever the level of interest rates i.e consumer confidence holding at those low level amid deteriorating job and economical market.

I'm looking forward on what can happen, so I'm not really focusing on the current state and current profit figures.

Based on historical standard, what we witnessed last quarter, is the worse global meltdown in almost everybody adult experience and not seen since 1930.

So I'm still bearish and I still think that the problems have not yet started and we will be getting worse data as we move forward, at least in Europe.

Andrew said...

I can say one thing about Nordea they have the strangest possible international money transfer methodology. It is like dealing with some kind of medieval system.

1. I transfer money from overseas

2. they write to me without saying why and that i should contact them.

3. They ask me to provide evidence i have sent them money

4. I provide it but they wont give me a receipt for the money received because they say they have not received it yet.

When i first sent them money four years ago i was not in Finland at the time. They refused to release this money to me. They refused to return the money to my account in England. They refused to fucking do anything i asked them to do. Instead they said i had to go to the branch i sent the money to in order for me to get the money sent to any place i wanted it sent to. They told me i had no natural right to be in Finland and refused to accept any explanation i gave them as to where the money came from. My English bank and my English solicitor were insufficient to satisfy their stupid demands.

It took me over 4 weeks of fucking around before i got the money. I decided i would never ever again ever have anything to do with these idiots ever again.

But then i got married to a Finn. And i have sent my money back to Finland in stages and each time it is a fucking drama!!


God help me when i need to get my money out of this fucking bank.

HousingFinland said...

I will have to write some article about Nordea as I think they take people for stupid...

I'll do that right away...

Billpete002 said...

I put my money in Handelsbanken - they seem to have a much beeter sense of things.

Though I still cant stand this "electron" visa card and having to pay for a debit card when its standard (and free) in the US.

Most online sources don't even accept election - and overseas? forget it.