OSLO, Aug 26 — Norway’s largest bank DNB should not be allowed to buy online rival Sbanken as the deal could hurt customers in the mutual fund market, the Norwegian Competition Authority (NCA) said in a preliminary ruling today.

More than 90 per cent of Sbanken’s shareholders have accepted DNB’s offer of 11.6 billion Norwegian crowns (RM5.4 billion). Norway’s bank regulator and the finance ministry have both given their blessings to the deal, leaving the NCA as the final hurdle.

The NCA warned on June 24 that it might block the transaction, primarily due to worries over the potential impact on competition in the market for mutual funds.

“Sbanken is a company with a significant market position, and has showed over time to have the ability and determination to challenge the established banks,” NCA department head Gjermund Nese said in a statement on Thursday.

“The authority ... is still concerned that DNB’s acquisition of Sbanken may lead to weakened competition and poorer conditions for bank customers who request mutual fund savings,” the regulator said.

Shares in Sbanken were 0.9 per cent lower by 0730 GMT while DNB was down 0.4 per cent. The Oslo benchmark stock index also traded 0.4 per cent lower.

The two banks have until September 16 to respond and the NCA will make its final ruling by October 7, the regulator said.

DNB said it still hoped to convince the regulator to change its mind, arguing that Norway’s fast-growing market for mutual funds continued to see an influx of new players.

“(DNB) will continue to cooperate closely with the NCA and provide all relevant information in order for the NCA to close its investigation as quickly as possible,” the bank said.

A takeover of the online-only Sbanken would also boost DNB’s share of the Norwegian mortgage market to an estimated 27 per cent from about 24 per cent while strengthening its asset management business.

DNB in April offered to pay 103.85 Norwegian crowns per share for Sbanken and later raised the all-cash bid to 108.85 crowns, securing support from the vast majority of owners as well as the boards of both companies.

DNB was advised by in-house broker DNB Markets while Sbanken was advised by Arctic Securities. — Reuters