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Nordea and DNB will bring together their operations in Estonia, Latvia and Lithuania to create a new bank.

The two banks say their Baltic operations are “a great match”, with Nordea’s strength being in the large corporate segment, while DNB’s is in the SME segment. Both banks also have significant presence in the retail space.

Geography-wise, both Nordea and DNB have strong presence in Latvia. Nordea is big in Estonia, while DNB focuses on Lithuania.

“It is time to take the next step and build for the future,” says Inga Skisaker, head of banking, Baltic countries, Nordea. “Together we will have the scale, stronger geographic presence and broader product offering enabling us to become the main bank for customers in the Baltics.”

The combined operations will have 3,000+ employees and €13 billion in assets.

The project will entail a large-scale technology integration, with the two banks currently using a multitude of systems from different local and international suppliers. These include the legacy IBIS platform from Financial Objects (which now resides with Temenos), the Forpost system from Lithuania-based Forpost, Oracle FSS’s Flexcube. Temenos’ T24 and Wall Street Systems’ Wallstreet FX.

“The new bank will be better equipped to counter increasing competition in the region and capitalise on scale,” says Mats Wermelin, head of Baltic division, DNB.

Nordea and DNB will have equal voting rights over the combined bank but different economic ownership levels. The deal is expected to close in Q2 2017. Until then, the two banks will continue with their independent operations.

Meanwhile, Nordea is going through a €1 billion technology overhaul in the Nordics, with Temenos’ T24 to be its new core banking solution and FIS’s (formerly Clear2Pay’s) Open Payment Framework (OPF) to be its new payments hub.