Finnish insurers, savings banks create new group

Leading Finnish insurance companies Pohjola and Suomi and 33 small savings banks this week agreed to create a financial services group to compete with Nordic giants Nordea and Handelsbanken.

"Pohjola, 33 savings banks and the Suomi Group have today agreed on cooperation in banking and insurance," Pohjola said in a Sept. 16 statement announcing the deal.

At the heart of the operation is a new bank, targeting the lucrative market in the Helsinki area, home to one-third of the country's 5.1 million people.

In the rest of the country, the savings banks will offer the new entity's insurance and fund management services.

"It makes sense, since banking distribution is the key, the most effective way of distributing insurance and fund management products," said Matti Ahokas, banking and insurance analyst with Danske Securities in Helsinki.

The financial market took a wait-and-see approach to the news, with Pohjola's share price dipping 0.16 percent on the Helsinki Stock Exchange, selling at 14.58 euros.

The Finnish banking sector is currently dominated by three big players, Nordea, Sampo and Oko Bank, with Sweden's Handelsbanken making an aggressive entry in the market.

"It's likely they will lose somewhat, since the new bank certainly tightens the competition, especially in the Helsinki area," said Juhana Virkkunen, a banking analyst with Evli, an investment bank in Helsinki.

The savings banks currently have a market share of 10 percent to 15 percent, analysts said.

"The new cooperation also strengthens the savings banks' position against Nordea and the other big players," Virkkunen pointed out.

According to Pohjola, the sales and marketing cooperation would begin immediately.