Thommy Mossinger, head of the regional bank in Stockholm for Sweden’s Handelsbanken, says his bank’s recently launched 0 percent, no-fee housing loan product proved so popular that the bank had to open the majority of its branches on a Saturday to cater for demand. Dan Jones reports.
Svenska Handelsbanken, Sweden’s largest retail bank by branches, has hit its domestic market with a new 0 percent interest loan exploiting a new tax break launched by the government. The ROT loan – standing for ‘repair, renovation, extension’ in Swedish – allows householders to borrow up to SEK100,000 ($12,600) at 0 percent interest and without charges for one year.
Launched on 4 May, the product is unique in the Swedish market and has not yet been replicated by any of Handelsbanken’s domestic rivals. Both Nordea and Swedbank said that introducing such a product was not on the agenda, though Danske Bank spokesman in Sweden, Carlos Cancino, told RBI that Danske was “discussing the product and looking closely into the offering from Handelsbanken”.
“Banks and customers have been living with this kind of margin pressure and interest rate pressure for a long time now. There has been a very sharp focus on these questions in Sweden for the past five years,” Cancino said.
Handelsbanken itself says that the “enormous” levels of interest in the product led it to open over 400 of its 461 Swedish branches on Saturday 16 May.
“In Stockholm we have 10 branches that are always open on Saturdays, but all 95 of them will be open this Saturday to encourage sales of this and other products,” said Thommy Mossinger, head of the regional bank in Stockholm, speaking to RBI.
The Stockholm regional bank is one of six such decentralised institutions run by Handelsbanken in its domestic market; each regional bank is responsible for its own profit and attempts to maintain the delicate balancing act of providing higher quality service at a lower cost than at other bank branches.
Handelsbanken was successful in this regard in 2008 – its cost-income ratio fell from 45.6 percent in 2007 to 44.3 percent last year, versus a Nordic banking cost-income ratio average that rose from 53.5 percent to 55 percent over the same period.
The bank also says a 2008 comparison of the four largest Swedish banks – SEB, Nordea, Swedbank and Handelsbanken itself – found that customer satisfaction levels were highest at Handelsbanken.
“We have been working like this for 35 years and the branch is responsible for all kind of customers – individuals, corporates and others. I think that is one of the keys to our success and why we have been a bank with low losses,” said Mossinger.
First-quarter results from the leading banks in Sweden show this strategy has indeed limited Handelsbanken’s loan losses, though this is in equal part due to its rivals’ greater exposure to the troubled Baltic region.
Net loan losses at Handelsbanken in the first quarter stood at SEK869 million ($109.6 million), compared with €356 million ($484 million) at the Nordic region’s largest bank, Nordea. As a percentage of total lending, Handelsbanken says its loan losses stand at under 0.25 percent compared with a regional average of almost 1.5 percent.
There are signs that the more autonomous branch strategy is beginning to catch on in Sweden: on 6 May Swedbank announced that it will restructure its banking divisions to give regional heads “a clearer business mandate as well as increased operational responsibility”, with operations in Sweden being organised into six regions. Swedbank, the bank said in a statement, is now “shifting the decision making power closer to the customers”.
That endorsement of the regional strategy is echoed by Mossinger, who said of Handelsbanken: “We are really near to the customer in ways that other banks are not.”
The bank is touting its new loan as an extension of that process. The loan is aimed at customers who are eager to take advantage of a new government tax credit allowing them to deduct 50 percent of the cost of maintenance or extension work done on their property, up to a maximum of SEK50,000 per year.
Others were more critical. “You can launch that product if you want to create attention but I think it is more fair for customers to have a fair pricing on your whole product – not only for the first SEK100,000 you want to borrow,” said Cancino.
Handelsbanken will withdraw the loan on 30 June, but there is a possibility that this will be extended if the product maintains its current level of popularity, Mossinger acknowledged.
Questioned about the overall pricing of Handelsbanken’s lending products, Mossinger maintained that the bank was no different to its rivals. “We are similar to the other banks in our pricing levels, even similar to [state-owned bank] SBAB,” he said. “We thought the initiative from the government was very good. Houses can get tax deductions, and this can boost the economy and help Sweden create jobs.”