The Norwegian banking sector

Compared to other European countries, the banking sector in Norway plays a smaller role in the overall economy. The balance sheet total of all Norwegian banks in 2022 was about 1.7 times the total economic output of Norway. By comparison, the European average was 2.4 times the GDP.

At 1.2%, the portfolio of loans at risk of default at Norwegian banks is lower than the average of 1.8% in other European countries. The cost-income ratio of Norwegian banks in 2022 was 40.5%, which is below the level of other European countries. The profitability of Norwegian banks, measured by return on equity, was well above the European average in 2022.

The Norwegian banking market is dominated by the partly state-owned DNB, which recently took over the online bank Sbanken. Also important are the pan-Nordic Nordea, based in Finland, and the various smaller regional banks, some of which are organised in network structures.

Norway’s banks are currently experiencing a positive development in that they can benefit from an increasing volume of lending. However, they are not only competing with foreign banks, which are particularly strong in the corporate customer segment, but also increasingly with fintech companies that are trying to gain market share through innovative solutions, especially in retail banking. Nevertheless, banks are taking action themselves in this increasingly disruptive area by setting up their own app-based digital banks, such as Sparebanken Vest with Bulder Bank, or acquiring digitally competent competitors, such as DNB, which has acquired the online bank Sbanken.

A substantial part of Norwegian banks’ lending is concentrated in the property sector. High household debt and property prices remain the biggest risks in the Norwegian financial system. Norwegian household debt is historically high and also above average compared to other countries. Many households have very high debt in relation to their income. House prices in Norway have increased significantly over a long period of time and have significantly exceeded disposable income per capita. However, there has been a decline in house prices in the last months of 2022, especially in Oslo.

The Norwegian extraordinary member savings banks

86 of the 116 banks in Norway are savings banks (incl. DNB Bank ASA). The highest administrative body, the Assembly of Representatives, comprises employees, customers and representatives of the public administration. The 20 largest savings banks own approx. 78% of the balance sheet volumes of the entire savings bank sector In 2022, Etne Sparebank and Sparebanken Vest merged under the name Sparebanken Vest. Similarly, Blaker Sparebank and Romerike Sparebank merged under the name Romerike Sparebank. Furthermore, Arendal og Omegns Sparekasse and Østre Agder Sparebank merged under the name Agder Sparebank. Finally, SpareBank 1 Modum and SpareBank Sørøst-Norge merged under the name SpareBank 1 Sørøst-Norge.

The majority of the savings banks are in alliances. The Sparebank 1 Alliance, Norway’s second largest financial services group, is an association of 14 mainly larger savings banks, while the Eika Group (formerly: Terra Alliance) consists of 51 mainly smaller institutions. In addition, there are 21 independent savings banks and DNB Bank, which alone accounts for 58% of the balance sheet total of the savings bank sector.

The alliances are interest groups rather than geographical alliances. Their internal cooperation generally covers the areas of technology and processing, advertising and communication, exchange of experience and purchasing. There are also joint subsidiaries, e.g., in the insurance sector or for the issuance of covered bonds.

Excerpt from the German Savings Banks Association (DSGV) article by Jana Gieseler