Handelsbanken has established
a reputation for providing a personalised local offering and
superior service, overseen by branch managers who enjoy a greater
level of autonomy than their peers. Maryrose Fison discusses this
unconventional approach with Magnus Uggla, head of international


Photograph of Magnus Uggla, HandelsbankenEvery successful
organisation has its own formula for getting results. Some set
outrageously high targets in the hope of rising above the bar,
others are more realistic, aiming for an achievable, but still
ambitious target.

For Handelsbanken, the Swedish bank
which now boasts around SEK2.2trn ($323bn) in assets under
management and a presence in 22 countries via a branch network of
716 outlets, it has a different approach entirely.

Since its former chief executive
officer Jan Wallander decided budgets were an unnecessary evil
which could prove dangerous in 1972, the bank has focused its
attentions on profit as opposed to volume.

Its objective has been to have a
return on equity which exceeds the average for the other listed
banks and the results speak for themselves.

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In all the years succeeding the
decision, Handelsbanken has been more profitable on average than
other listed banks in Sweden.

Other points of differentiation for
Handelsbanken include:

  • No central marketing
    campaigns. Handelsbanken’s policy is that the branch
    has the best knowledge of the local customer, so marketing
    activities are decided locally;
  • Staff are not set individual
    sales targets;
  • No bonuses. Such a policy,
    which would be regarded with horror by many in the industry, is
    far-reaching at Handelsbanken. The bank remuneration policy means
    that branch staff all work on flat salaries; a limited number of
    staff in the investment banking and asset management operations are
    entitled to bonuses; and
  • Low risk strategy.
    Handelsbanken has a low risk tolerance and its business model is
    focused on underwriting and managing ultimate credit default risk
    at branch level. Around 94% of all credit decisions are taken by
    the local branch manager.

Bar chart showing markets and branch networks at HandelsbankenFounded in
Stockholm in 1871, the bank has grown from a single branch with
eight bank managers to one of the country’s leading banks with
around 10,000 employees; outside Sweden, Handelsbanken is
particularly strong in Denmark, Finland, Norway and the UK.

Taken together, the Sweden-based
units and the outlets in the Nordic countries, plus the UK, account
for 688 of the group’s total branch network.

Magnus Uggla, the head of
international banking at Handelsbanken, told RBI that the
bank’s unconventional approach towards budgets underpins its

“Some people say it’s not good
enough to be ahead of the competition and argue that you should be
number one,” Uggla said.

“We have been number one in some
years but in other years it has been really, really tight and there
is no guarantee whatsoever that we can achieve our objective. But
we have managed to do it for 38 years in a row.”

His goals for the coming year are
twofold. With an increasing trend toward outsourcing occurring in
retail banks across the UK and parts of Europe, Uggla believes
there will be rising demand for commercial banking services that
retain the personal touch.

He is in the process of growing the
bank’s Netherlands operations- an area he anticipates will produce
strong growth in the year ahead- by adding a number of branches
which ready to operate within six months.

“We are currently expanding our
branch network in the Netherlands,” he explained.

“It is a small network at the
moment and we have five branches up and running. We have recruited
another four branch managers to open up in new locations”.

“There is quite a low level of
customer satisfaction among Dutch banking customers because there
has been quite a lot of turmoil in the banking system. The
situation is quite similar to the situation in the UK.

“There is a lot of restructuring
going on in the banking system and banks keep centralising their
operations more and more. They introduce call centres and it
becomes impossible to meet with your banking manager.”

A factor which will be important in
the bedding in of the new bank branches is the management
structure, as well as the corporate culture, said Uggla.

Table showing earnings at HandelsbankenWhile many banks
favour a centralised approach with branch decisions decided in a
head office that is often geographically removed from its bank
managers, Uggla will implement a decentralised system of
management. He believes this will be empowering for staff and
contribute to greater customer retention and referrals.

“In Handelsbanken, each branch is
like a small independent business unit, like a small company,” he

“The branch manager is like the CEO
of that small company. There is one limitation and that is the
geographical area [of] responsibility outside of which you are not
allowed to do business. But apart from that the branch manager
decides how many people there should be at the branch, what sort of
skill sets they should have.

“Together with his team, he decided
which customers to actively approach, what products to offer and
how to price them.

“The benefits of this are that the
customer can get a very high level of customer service, they know
who their contact person is, they can call their branch manager,
they can send an email and they can reach their account manager –
it’s all very accessible”.

While Europe continues to struggle
with the prolonged fallout from the credit crisis, Uggla said there
are further growth opportunities to be exploited in Asia and

The group currently has branches in
Shanghai and Hong Kong and representative offices in Beijing and
Taiwan and an influx of Nordic manufacturing companies setting up
bases in the region has boosted demand for the bank’s services
outside its home markets.

Familiarity is key and companies
from the Nordic region feel more comfortable dealing with a
familiar banking brand while operating abroad than with a local
institution where language and expectations may differ.

“If there is a Swedish company that
has a subsidiary in China, that subsidiary might be loss-making in
the early years and might not look like a very bankable proposition
[for a Chinese bank],” Uggla explained.

“Of course we know the parent back
home and we can get support from the parent and thereby take risks
in terms of lending money to the subsidiary in China.”

But a presence in so many countries
also becomes a challenge. Retaining a consistent corporate culture
across the US, Europe and Far East is one of Uggla’s main missions
and strengthening brand awareness among staff is a key goal of his
for the coming year.

“There are huge cultural
differences between the countries where we operate,” Uggla

“These have to be recognised. We
start from very different positions if you compare, for instance
Holland to Russia or France to America.

“One of my main missions is to
strengthen the Handelsbanken corporate culture in every country
that we operate because Handelsbanken’s main competitive advantage
is the very strong corporate culture and it takes some time before
it is fully implemented in the countries we operate in.”

Photograph of Handelsbanken's headquarters

The bank assesses how well a
country’s branches are aligned with Handelsbanken’s philosophy
using a mixture of resources.

“We implement the culture in many
different way,” Uggla said.

“We have both e-learning programmes
and cultural seminars. We send people to Sweden to get a better
understanding of the bank. We constantly discuss various aspects of
the corporate culture. New branches often get a ‘buddy branch’ to
help them get the right understanding.

“Finally, in the annual salary
review process one of the aspects that is taken into account is how
strong the person is as a culture bearer.”

He may have a big task on his hands with banks spread across
three continents but given his long track record with the bank,
Uggla looks well-suited to getting the Netherlands’ expanded
operations up and running and strengthening corporate culture in
the international divisions in the year ahead.



Handelsbanken’s 9M10 profits up

In the nine months to 30 September,
operating profit for continuing operations at Handelsbanken
increased by 4% from the year-ago period to SEK10.93bn

Net interest income declined by 6%
to SEK15.7bn but net fee and commission income increased by 9% to

Handelsbanken’s loan loss ratio
fell by 13 basis points to 0.10% with loan losses more than halving
to SEK1.21bn.

Return on equity for total
operations was unchanged at 12.8% while the bank’s Tier 1 ratio
according to Basel II was up 2.2 percentage points to 15.7%.

The cost-income ratio for
continuing operations increased by 180 basis points to 47.6%.

Highlights included further growth at Handelsbanken’s UK
division, with 15 new branches opening; during the same period, net
interest income in the UK increased by 57%.