Sweden’s Handelsbanken Group is ploughing more money
into its northern European, non-Swedish retail banking franchise.
It already has 32 branches in the UK, for instance, and is looking
to roll out up to 40 more before the end of the year in markets
such as Denmark, Germany, Norway and Finland


Quietly but steadily, Svenska Handelsbanken, Sweden’s
third-largest financial services group, is building a strong
branch-based network across northern Europe. The group has just
opened its 32nd branch in the UK and has 38 in Denmark, 43 in
Finland, 42 in Norway and 17 in other areas such as Germany and
Luxembourg (see table below). This geographical diversity
is helping to lessen its dependency on the competitive domestic
Swedish market.


It is an interesting time for Handelsbanken. The bank has announced
that it is merging its Stadshypotek Bank subsidiary into the main
group and dropping the Stadshypotek Bank brand in an effort to
simplify its domestic retail banking business. It has also just
sold its Swedish occupational pensions unit, SPP, to Norway’s
Storebrand for a robust price of SEK18 billion ($2.75 billion). The
capital gain on the deal for Handelsbanken is approximately SEK4
billion. As part of the deal, Handelsbanken’s mutual funds will be
part of Storebrand’s occupational pensions in Sweden and Norway

The deal means that Storebrand and SPP will, together, be the
leading player in the Nordic occupational pensions market.
Storebrand is also acquiring Handelsbanken Life and Pensions, a
Dublin-based unit offering companies pension plan solutions, and
SPP Fonder, an asset management unit with assets under management
of SEK57 billion. In addition, Storebrand has a two-year option to
acquire Handelsbanken’s remaining occupational pensions business,
Handelsbanken Liv.

Handelsbanken says it is investing in its branch-centric retail
banking business, especially outside Sweden. The group has decided
to step up the pace of its organic growth outside its home country
and aims to open up to 40 new foreign branches during the rest of
this year. A total of 14 branches were opened during the first six
months of the year and another 20 branch managers were recruited
for future new branches.

The proportion of the bank’s operating profit generated from
outside Sweden was 20 percent in the first half of 2007. Some 25
percent of the group’s consumer lending is in the branch operations
outside Sweden and 47 percent of the increase in lending between
the first and second quarters of 2007 was generated in the
non-Swedish branch operations.

Net interest income rose overall by almost SEK250 million in the
first half of 2007. In the Swedish branch operations it increased
by 2 percent to SEK5.7 billion; in its branch office operations
outside Sweden, it rose by 15 percent to SEK1.93 billion.
Discussing Handelsbanken’s first half results, Ulf Riese, CFO of
the group, said: “We are expanding [internationally] at a fast

At Handelsbanken International, the group’s non-Swedish business
outside of the UK, Norway, Finland and Denmark, Germany and
Luxembourg showed the largest increases. In the UK, operations
continued their rapid expansion as six new branches were opened,
lending volumes rose by almost 56 percent and operating profit rose
by 52 percent to SEK129 million.

Talking to RBI, Magnus Uggla, general manager of the
group’s UK business, said Handelsbanken will look to differentiate
itself in the competitive UK market through a “personalised local
offering, providing bespoke financial solutions and a superior
service”. He said the bank is targeting “all large cities all over
the country”. Asked whether there were any particular segments of
the market the bank was looking at, he replied, in a reference to
Handelsbanken’s strategy of granting great autonomy to individual
branch managers: “There is no central policy. It is decided by the
local branch.”


Perhaps the most surprising aspect of the group’s overall northern
European expansion is that low costs, one of Handelsbanken’s
greatest strengths (and largely a result, it says, of its
decentralised branch strategy), have been maintained. The group’s
cost-income ratio in the first half of 2006 was 60 percent and in
the first half of 2007 it was 57 percent. For the second quarter of
2007, it had dropped even more, to 56 percent.

Talking about the cost-income ratio, Riese said the group was “not
looking at costs particularly”. It was costing SEK3.5 million on
average to open a branch outside of Sweden and another SEK1.5
million was being spent on average before a branch broke

Some 75 percent of branches now show positive growth and every year
after a branch is opened it exhibits around 3 percent year-on-year
positive earnings momentum.