Catrin Fransson, head of retail business at Swedbank,
one of Sweden’s four largest retail banks, tells Maryrose Fison why
the bank is making leaps and bounds into the field of mobile
banking and how it plans to boost its presence in the new mortgage
lending market.

 

Catrin Fransson, SwedbankIt may be one of Sweden’s longest-standing retail banks,
but tradition has not stopped Swedbank from staying ahead of the
times as a major innovator of technological solutions within the
Nordic banking region.

Founded in 1820, Swedbank today boasts a retail
client base of 4m – almost half the country’s population – and a
balance sheet total of SEK1.89trn ($245.9bn).

Last December, it was among the first Nordic
banks to develop a successful digital banking solution that enabled
customers to undertake banking activities remotely via mobile
phone.

So far the results have been promising. Within
the first three months of launching its first iPhone app, the rate
of log-ins to Swedbank’s mobile banking service increased by 720%.
It is a trend which is set to continue as the bank ploughs more
resources into enhancing its m-banking and mobile payments
offerings.

Catrin Fransson, promoted to the position of
head of Swedish retail at Swedbank in May having previously held
the dual post of chief executive officer for Swedbank mortgages and
head of customer offerings and products, toldRBI she has
high hopes for the bank’s IT development.

“We are working to keep up with the innovation
that our clients expect of us and continuing development of the
biggest digital channels – internet and mobile banking – will be
extremely important to us in the coming months,” Fransson said.

At the moment, the bank is working in
collaboration with Sweden’s central bank, the Sveriges Riksbank,
and other banks in the region to further develop a payments system
for mobile banking which is expected to be rolled out before the
end of the year.

 

Business segments: Swedbank – income by business unit Q110Goals

At present, the bank commands
approximately 16% of new lending but Fransson aims to increase this
to 25% within three to four years.

It is an unofficial goal but one she hopes,
with her background as CEO of Swedbank Mortgages, can be
comfortably achieved.

If the Riksbank’s latest forecast for Swedish
banks, posted in its Financial Stability Report on 1 June, is
correct Swedbank is likely to be well-positioned to hit this target
going forward.

Swedbank’s share of total lending (bank and
mortgage) to households was unchanged at 27% in the first
quarter.

During the first two months of 2010 the share
was 16%, compared with 13 per cent in the fourth quarter of 2009.
Corporate lending continued to decline in 2010. Despite lower
volumes, the bank’s market share was unchanged at 19%.

Riksbank downgraded expected loan losses for
major Swedish banks (of which it listed Swedbank as one of four
banks making up this category) to SEK61bn for the period 2010 to
2012. This represents a downward adjustment of SEK48bn for the
period 2010 to 2011 from the Riksbank’s previous forecast in
November 2009.

Furthermore, Swedbank’s loan losses are
estimated to reach around SEK15bn during 2010-2012, an improvement
on previous reports, and its tier one capital ratio has
strengthened as a result of a successful rights issue and improved
funding structure.

Its forecast end of year capital ratio is now
12.1%, compared to a previously predicted 4.8%.

When it comes to selling mortgage
loans, Swedbank is in a unique position, compared to retail banks
in other countries of the European Union due to Sweden’s
well-documented stability throughout the economic crisis.

Low borrowing costs, four income tax cuts since
2006 and five consecutive months of rising export levels until
April have boosted Sweden’s growth.

In early June the International Monetary Fund
praised Sweden for weathering the global downturn relatively well
and applauded the Riksbank’s “aggressive stabilisation policies”
which included a sharp relaxation of monetary policy and a slew of
emergency financial sector support measures.

However, Fransson anticipates the country’s
benchmark lending rate – a record low of 0.25% – is almost
certainly likely to rise in coming months creating new demands for
retail banking staff in ensuring prospective borrowers are
well-informed of future risks.

“Interest rates have been extremely low within
Sweden but we know that will change quite soon,” she said.

“We have taken a position where we said it is
extremely important to have good financial advice for our customers
who are taking out loans that don’t have a fixed interest rate so
that they know what they are doing and how to handle it when the
interest rates inevitably go up in the future.”

Swedbank branch: majority of area managers now repositioned within branch manager role

Restructuring Swedish retail
banking

As part of its strategy to prepare
prospective borrowers for rising interest rates, the bank has
recently undertaken a substantial restructure of its Swedish retail
banking division aimed at promoting greater client-bank manager
interaction and increasing overall efficiency.

An entire layer of middle management, known
within Swedbank as the area managers, began to be phased out last
autumn paving the way for a direct channel of communication between
local bank managers and board directors.

Previously, the bank’s 377 domestic branch
managers reported into about 40 area managers who acted as an
intermediary layer of management, feeding information through to
board level management and relaying instructions back to
branches.

The new arrangement, which is still being
implemented, has seen the majority of area managers repositioned
within branch manager or other roles within the group, giving
Swedbank a decentralised approach designed, in Fransson’s own
words, to “empower the front line to move out and engage with
clients more.”

“We are sure [it] will be useful for the
customers and also for the bank. It will be more efficient and will
give us a higher ability to adapt to the local differences that
proliferate the Swedish marketplace,” she said.

“By being a truly local bank in the different
places we operate, the client will feel that whoever he or she is
meeting is the one taking the decisions based on their first hand
knowledge.

“There are huge regional differences within the
housing market in Sweden, for example, and it is important to have
local knowledge when dealing with clients.”

Although formally in the pipeline for one year,
Fransson says it is in fact the result of five years’ preparatory
work that
has involved improving and strengthening occupational roles,
responsibilities and competence within the 18,000-strong
workforce.

Success in growing sales from direct channels
has enabled Swedbank to cut costs by shrinking its branch network,
with 143 outlets closing in the last year.

Branches outside Sweden have borne the brunt of
the cuts with only 38 units or 9% of all domestic outlets being
closed, keeping the network at almost 400.

Swedbank’s products are also sold through an
additional 275 savings bank branches in Sweden.

In the Baltic region (Estonia, Latvia and
Lithuania), 18% of the network or 52 branches were shuttered in the
past 12 months, while just over 25% of units (53 branches) in
Ukraine and Russia were closed.

Performance

Swedbank – business
fundamentals

 

Q110

Q109

% change

Net interest income (SEKbn)

4.02

5.80

-31

Total income (SEKbn)

7.67

9.42

-19

Total assets (SEKtrn)

1.89

1.83

3

Net profits (SEKbn)

0.55

-3.34

n/m

Cost income ratio (%)

57

49

800bps

Source: Swedbank