Handelsbanken
Encyclopedia
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
bank.
History of Svenska Handelsbanken
The history of Svenska Handelsbanken goes back to 1871 when a number of prominent companies and individuals in StockholmStockholm
Stockholm is the capital and the largest city of Sweden and constitutes the most populated urban area in Scandinavia. Stockholm is the most populous city in Sweden, with a population of 851,155 in the municipality , 1.37 million in the urban area , and around 2.1 million in the metropolitan area...
's business world founded Stockholms Handelsbank. The bank began operations on July 1, 1871 in rented offices located in the central Old Town district of Stockholm, which at that time was still the commercial and financial centre of the city.
At the outset, the bank proclaimed that it would pursue "true banking activities" with deposits and loans and that it would focus on the local bank market, that is, the business activities of Sweden's capital city. The bank's first year of operations was very successful and after only a couple of years, Handelsbanken held a strong position among Stockholm banks.
The Fraenckel period
During the early 1880s, the bank grew more rapidly than its competitors. The crash in the construction sector in Stockholm in 1885 and the downturn in the economy that began in the same year seriously affected the previously expanding bank. Following weak results in the early 1890s, the bank's owners demanded new management. In 1893, Louis Fraenckel, a private banker, was appointed as the new managing director of the bank. He would lead the bank for 18 years up to 1911.Slightly after Fraenckel's appointment, rapid economic development in Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
created a strong demand for banking services. Competition was tough among the banks. Fraenckel's strategy for increasing profitability was to focus more on bond and foreign exchange dealings.
In 1896, the head office was moved to rented premises in the new business centre of Stockholm in the lower Norrmalm area. Not until 1905, long after its two major competitors, did Handelsbanken move into its own prestigious building located on Kungsträdgårdsgatan. Since then, these premises have served as the bank's headquarters, now greatly expanded. In 1905, the bank had some 50 employees working at six branch offices. It reported a profit of one and a half million Swedish kronor and an impressive 0.31 cost/income ratio.
Stockholms Handelsbank expands to become Svenska Handelsbanken
The first decade of the twentieth century was an era of bank mergers in Sweden as well as in EuropeEurope
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
. The number of banks in Sweden was reduced by more than one-half. As far as Handelsbanken was concerned, the first big acquisition occurred in 1914 with the merger with Bankaktiebolaget Norra Sverige. This significantly expanded the bank's operations in the strongly developing northern parts of the country, giving it branch offices in 36 new towns, primarily along Norrland's coast.
While Handelsbanken's competitors expanded to the west and south during this consolidation period, the bank's management continued to look to the north where the forest industry was undergoing a boom. In 1917, Handelsbanken further strengthened its position in this promising area through the acquisition of Norrlandsbanken and its 79 branch offices. As with Bankaktiebolaget Norra Sverige, Norrlandsbanken was a product of the merger of several smaller banks.
Even though the acquisitions in Norrland improved the ratio between deposits and loans, such a strong concentration in northern Sweden would soon prove to be unwise. In 1918 Handelsbanken opened new branch offices in Göteborg and Malmö
Malmö
Malmö , in the southernmost province of Scania, is the third most populous city in Sweden, after Stockholm and Gothenburg.Malmö is the seat of Malmö Municipality and the capital of Skåne County...
. The Stockholm banks found that there was also an attractive deposit surplus in southern Sweden, and in 1919 Handelsbanken acquired Bankaktiebolaget Södra Sverige with its 67 branch offices.
Following the merger with Bankaktiebolaget Södra Sverige, the bank changed its name to Svenska Handelsbanken. In addition, Svenska Handelsbanken adopted the octagon symbol from Bankaktiebolaget Södra Sverige, which would function as its own logo for many years.
A major bank during the interwar period
In 1921 Handelsbanken celebrated its fiftieth anniversary, but the annual report did not bring any good tidings. Instead, it was filled with concern about the negative effects on the economy of the recent world warWorld War I
World War I , which was predominantly called the World War or the Great War from its occurrence until 1939, and the First World War or World War I thereafter, was a major war centred in Europe that began on 28 July 1914 and lasted until 11 November 1918...
. The Board pointed out in its report that "business has suffered under extreme conditions, which have directly affected the bank’s operations." It stated that "substantial amounts … are proposed for write-downs due to losses." The following two years were also weighed down by recession. However, the economy improved during the latter half of the 1920s, and the bank reported increased profits. But then the bank was hit by the worldwide depression in the first half of the 1930s, and annual net profits fell by more than one-half. Nonetheless, there was a recovery in the last years before the outbreak of war.
Consolidation continued on the Swedish bank market during the interwar era. With the acquisition of Mälarebanken, for example, Handelsbanken was able to generally maintain the number of branch offices at a stable level of slightly over 260. At the same time, the other banks drastically reduced the number of branch offices. As a result, one out of every four bank offices was a Handelsbank branch office when World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
broke out. The bank had over 2,000 employees at this time.
Expansion continues
Handelsbanken continued to expand on an increasingly consolidated Swedish bank market in the postwar period. The acquisitions of Vänersborgsbanken and Norrköpings Folkbank during the 1940s were followed by the purchase of Luleå Folkbank and Gotlandsbanken in the 1950s. In 1955 the mortgage company SIGAB was purchased, which subsequently changed its name to Handelsbanken Hypotek. The acquisition of a long series of provincial banks was completed with the acquisition of Skånska Banken in 1990. This acquisition was as partly described as a milestone at the time of presentation. Handelsbanken's expansion would certainly continue, but it was about to take a new path.Jan Wallander decentralises
In 1970, Jan Wallander was recruited from the NorrlandNorrland
Norrland is one of the three lands of Sweden , the northern part, consisting of nine provinces. The term Norrland is not used for any administrative purpose, but it is common in everyday language, e.g...
provincial bank Sundsvallsbanken as the new president of Handelsbanken. Wallander would apply and develop the ideas that had been used at Sundsvallsbanken. A decision was made to extensively decentralise Handelsbanken's organisation. Experience from Sundsvallsbanken had shown that the branch offices needed support from specialists to meet the needs of larger customers; hence, they should be brought together into larger units. If these units were about the same size as Sundsvallsbanken, they would not be unmanageably large. Thus, the bank's branch offices were divided into a number of regional banks, each consisting of about 70 branches. The new regional banks had their own boards and a high degree of independence.
In the new, decentralised organisation some of the previous tasks of the head office were transferred to the regional head offices, while other functions were no longer needed. This latter group included the central unit that worked on budgeting. Wallander considered budget
Budget
A budget is a financial plan and a list of all planned expenses and revenues. It is a plan for saving, borrowing and spending. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods...
s to be an unnecessary evil. Instead, a new financial reporting and management system was developed based on the actual profit
Profit (accounting)
In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...
outcome.
The new Handelsbanken organisation would focus on profitability rather than volumes. The goal was, and still is, to have a return on equity which exceeds the average for the other listed banks. From having lower profitability than its competitors in the late 1960s, Handelsbanken was able to achieve the same level of profitability as the other Swedish banks in 1971. Since 1972, Handelsbanken has met the goal of being more profitable than the average for the other listed banks. The comparison now includes Nordic banks.
The achievement of higher profitability than other banks active in the same market while working under similar conditions requires that employees be more productive than is normal for the sector. Consequently, the bank's management thought it was reasonable that employees shared in the extra profits. During this time, there was a lively debate in Sweden on how employees could gain more influence in companies. For the financial year 1973, the bank's board decided to allocate SEK 10 million to a profitsharing foundation called Oktogonen. The funds were placed in shares of Handelsbanken, thus giving the employees owner representation on the bank's board. Since the managed funds are not paid out directly but at the time of retirement
Retirement
Retirement is the point where a person stops employment completely. A person may also semi-retire by reducing work hours.Many people choose to retire when they are eligible for private or public pension benefits, although some are forced to retire when physical conditions don't allow the person to...
, Oktogonen became an informed, long-term, major owner – something that was lacking at Handelsbanken. Favourable profit development at the bank enabled new allocations, and by 1988 Oktogonen owned 10% of the votes in Handelsbanken.
Handelsbanken pulls through the Swedish banking crisis
During the extended boom of the 1980s, bank lending in Sweden had grown exceptionally fast. A large share of the lending went to speculative investments. In autumn 1990, a serious crisis emerged in Swedish banking as a result of a deep recession. Corporate loanLoan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
s were the primary cause of huge loan losses in the Swedish banks. The Swedish government's costs for supporting the bank sector were an incredible SEK 66 billion. During the banking crisis, Handelsbanken was the only major Swedish bank that was not forced to discuss applying for a state guarantee. Handelsbanken was able to utilize the situation to advance its position on the Swedish banking market. For example, Handelsbanken's share of deposits from Swedish households increased from 11% in 1990 to 17% by the end of the decade. The cash purchase of Stadshypotek in 1997 contributed to the increase in business volume.
Nordic offensive
Swedish currency regulations were lifted in 1989, which led to an increased internationalisation of the Swedish banking market. Handelsbanken was well prepared for this change. During the 1980s, the bank had built up its international operations with branch offices and subsidiaries in LondonLondon
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
, New York
New York
New York is a state in the Northeastern region of the United States. It is the nation's third most populous state. New York is bordered by New Jersey and Pennsylvania to the south, and by Connecticut, Massachusetts and Vermont to the east...
and Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, for example.
Could Handelsbanken's successful Swedish model also be used to provide full-service banking in other countries? Based on these considerations, Handelsbanken decided to start operations in Norway. In early 1990 the bank made a cash offer for Oslo Handelsbanken. Through organic growth and the acquisition of Stavanger Bank in 1991, Handelsbanken was able to take advantage of a historical opportunity for expansion created by the banking crisis in Norway in the early 1990s. During the 1990s, the bank created a nationwide network of branch offices in Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
, supplemented by the purchase of Bergensbanken in 1999.
In Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
, Handelsbanken acquired the healthy parts of Skopbank in 1995. At the same time, it decided to open branch offices in several major Finnish cities, whereby Handelsbanken became Finland's fourth largest bank.
In Denmark
Denmark
Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...
, Handelsbanken opened its first branch office in 1996. The opening of the Copenhagen
Copenhagen
Copenhagen is the capital and largest city of Denmark, with an urban population of 1,199,224 and a metropolitan population of 1,930,260 . With the completion of the transnational Øresund Bridge in 2000, Copenhagen has become the centre of the increasingly integrating Øresund Region...
office was soon followed by further openings in other parts of the country. In 2001, Handelsbanken purchased Midtbank, which had a very strong presence in the Jutland
Jutland
Jutland , historically also called Cimbria, is the name of the peninsula that juts out in Northern Europe toward the rest of Scandinavia, forming the mainland part of Denmark. It has the North Sea to its west, Kattegat and Skagerrak to its north, the Baltic Sea to its east, and the Danish–German...
area of Denmark. With this acquisition, Handelsbanken became the fifth largest bank in Denmark with 32 branch offices.
Increased interest in life insurance
The 1990s were also a period of some convergence between the financial services and insurance sectors. Pension savings represented an increasingly important share of long-term savings of the bank's customers. Given this development, the bank acquired the mutual life insurance company RKA in 1992. The name of the company was changed to Handelsbanken Liv in connection with the purchase. Following a change in the law, Handelsbanken Liv was demutualised on 1 January 2002. This was the first demutualisation of its kind in Sweden. Before demutualisation, customers who would be affected by the change were given the opportunity to vote on it. Of these, 98% voted in favour of demutualisation.In March 2001, Handelsbanken acquired the life insurance
Life insurance
Life insurance is a contract between an insurance policy holder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger...
company SPP. With this purchase, Handelsbanken became the second largest player on the Swedish life insurance market. The purpose of the acquisition was to demutualise SPP as well. In 2004, SPP's customers also voted for demutualisation. However, in 2007 Handelsbanken announced that a deal for selling SPP had been settled with Norwegian insurer Storebrand
Storebrand
Storebrand is a financial services company in Norway. By volume, the company's main activities are related to life insurance and pension savings. However, the company also has major divisions working on investments, banking and, since 2006, P&C insurance products...
.
Handelsbanken today
Handelsbanken holds a strong position on the Nordic bank market with a nationwide branch office network in Sweden and nearly nationwide networks in the other Nordic countries.Since 2000 Handelsbanken has conducted universal banking operations in Great Britain
Great Britain
Great Britain or Britain is an island situated to the northwest of Continental Europe. It is the ninth largest island in the world, and the largest European island, as well as the largest of the British Isles...
opening its 100th branch in Ilkley in June 2011.
Over some ten years, the bank has annually achieved its objective: to have higher profitability and more satisfied customers than its competitors.
Handelsbanken - a universal bank
Handelsbanken aims to be a universal bank, in other words, to cover the entire banking area: traditional corporate transactions, investment banking and trading as well as consumer banking including life insurance. Handelsbanken is strong on the Swedish market with more than 460 branches. During the last 15 years, Handelsbanken has been expanding its universal banking operations into the other Nordic countries, and in recent years also in Great Britain. The bank has recently opened up in the Netherlands, Latvia, Estonia and Lithuania following the same decentralized model it uses in its core markets.The bank has around 10,000 employees.
Subsidiaries and branches
- SwedenSwedenSweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....
(461 branches) - United KingdomUnited KingdomThe United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
(100 branches) - DenmarkDenmarkDenmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...
(54 branches) - FinlandFinlandFinland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
(44 branches) - NorwayNorwayNorway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...
(34 branches) - NetherlandsNetherlandsThe Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
(10 branches) - GermanyGermanyGermany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
(7 branches) - SpainSpainSpain , officially the Kingdom of Spain languages]] under the European Charter for Regional or Minority Languages. In each of these, Spain's official name is as follows:;;;;;;), is a country and member state of the European Union located in southwestern Europe on the Iberian Peninsula...
(2 branches) - EstoniaEstoniaEstonia , officially the Republic of Estonia , is a state in the Baltic region of Northern Europe. It is bordered to the north by the Gulf of Finland, to the west by the Baltic Sea, to the south by Latvia , and to the east by Lake Peipsi and the Russian Federation . Across the Baltic Sea lies...
(1 branch) - LatviaLatviaLatvia , officially the Republic of Latvia , is a country in the Baltic region of Northern Europe. It is bordered to the north by Estonia , to the south by Lithuania , to the east by the Russian Federation , to the southeast by Belarus and shares maritime borders to the west with Sweden...
(1 branch) - LithuaniaLithuaniaLithuania , officially the Republic of Lithuania is a country in Northern Europe, the biggest of the three Baltic states. It is situated along the southeastern shore of the Baltic Sea, whereby to the west lie Sweden and Denmark...
(1 branch) - AustriaAustriaAustria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
- China, People's Republic ofPeople's Republic of ChinaChina , officially the People's Republic of China , is the most populous country in the world, with over 1.3 billion citizens. Located in East Asia, the country covers approximately 9.6 million square kilometres...
- China, Republic of (Taiwan)Republic of ChinaThe Republic of China , commonly known as Taiwan , is a unitary sovereign state located in East Asia. Originally based in mainland China, the Republic of China currently governs the island of Taiwan , which forms over 99% of its current territory, as well as Penghu, Kinmen, Matsu and other minor...
- FranceFranceThe French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
- Hong KongHong KongHong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
- IndiaIndiaIndia , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
- LuxembourgLuxembourgLuxembourg , officially the Grand Duchy of Luxembourg , is a landlocked country in western Europe, bordered by Belgium, France, and Germany. It has two principal regions: the Oesling in the North as part of the Ardennes massif, and the Gutland in the south...
- Malaysia
- PolandPolandPoland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...
- RussiaRussiaRussia or , officially known as both Russia and the Russian Federation , is a country in northern Eurasia. It is a federal semi-presidential republic, comprising 83 federal subjects...
- SingaporeSingaporeSingapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
(1 branch) - SwitzerlandSwitzerlandSwitzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
- USA (1 branch)