Konsekvenser og muligheder ved en fusion mellem Sydbank og Jyske Bank

Glenn Hurup Felby & Christian Nedergaard Henriksen

Student thesis: Master thesis

Abstract

The Danish banking market has in recent years been dominated by a few large and many small banks. Several experts believe that the small banks do not have the capacity to compete with the bigger players and therefore could benefit from mergers. The reason to merge is that larger banks have greater potential to create competitiveness in the market and reduce their operating costs through cost saving synergies and increasing income through revenue synergies. Numerous analysts have estimated that the next big merger will be between Sydbank and Jyske Bank rank as the fifth and third largest bank in Denmark respectively. In order to analyse how a merger between the banks would create more value and what consequences it would bring an analytical model is created, with focus on the major trends in the banking sector. The analytical model yielded financial analysis and valuations for both banks, as a well as a valuation of the merger. The results will suggest whether a merger should take place from an economic point of view. There would be a significant potential in cost savings from the merger of Sydbank and Jyske Bank. The analysis shows that the merged bank could close around 50 % of the existing branches and reduce staff levels by a quarter. In addition, the merger would create revenue synergies due to the increased capital the bank would possess. The higher level of capital could attract large corporate customers with more demanding requirements and needs. The merger would also provide a better diversification of the customer portfolio as Sydbank and Jyske Bank had their expertise in various segment groups. The last positive synergy is the revenue synergy, that is related to the new image the bank has the potential to create. The new bank would be able to hold a position as the bank of entire Jutland. Jutland has the image of being conservative and this conservative image could attract more risk-averse customers as opposed to Danske Bank and Nordea. It will however also cause some integration cost to integration. Both banks also have a corporate culture that could prevent the merger. This is due to the fact that both have a locally rooted tradition that they will not compromise on, which might cause tension. The micro-economic consequence of the merger will be a more competitive and professional bank where profit maximisation is the main objective. The banks should certainly merge from an economic point of view. It will however have the consequence that there locally rooted culture and image will disappear, which is a large part of bank’s values and how the banks see themselves. Christian Henriksen Glenn Felby Cand. Merc. FIR CBS Kandidatafhandling Side 6 af 122 The macro-economic consequences are shown by the potential change in market positions. The Danish banking sector would consist of three main players if this merger went through, which would increase competition between large banks, increasing efficiency. Similarly, another expected consequence could be an evolution towards more mergers, as smaller banks would not have enough capital to cope with the increased competition.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2014
Number of pages122