While the British have enthusiastically thrown themselves around the dance floor and sung along to Abba tunes through good times and bad for over 30 years, we now have leading Swedish bank, Handelsbanken, holding hands with British businesses and nurturing its clients through the worst economic downturn in living memory. We assess what can be learned from its approach.
Business Secretary, Vince Cable, has been at the forefront of politicians calling for a change in the way banks operate, branding them as a ‘structurally flawed industry’ failing in their support to private enterprises. Some banks, however, beg to differ. Namely, Anders Bouvin who is the Chief Execuitive Officer of Handelsbanken. Bouvin is proud to announce that since the collapse of Lehman Brothers in September 2008, Handelsbanken has “made £6bn worth of new loans, doubled its number of branches, and welcomed thousands of new customers.”
Of course, it’s important to put this into context. In the grand scheme of things, banks such as Barclays, NatWest and HSBC still offer the lion’s share of credit to consumers and businesses in the UK. But Mr Cable’s point about structure is an important one, both in terms of why credit is still tight for UK businesses and a reason why Handelsbanken is increasingly seen as a rising star in the sector.
Firstly, the common bank lending model is roughly based on a top down macro approach, whereby banks loosen and tighten credit depending on the economic outlook. So in the good times they lend more and in the bad times less. Unfortunately, such a model produces an uneven lending policy - hence why credit has been tight for the past couple of years. In addition, by focusing on economics rather than the customer, bad loan decisions are still being made.
By contrast, Handelsbanken’s starting point is first and foremost in sound credit analysis of the customer. Its lending policy remains the same whatever the economic backdrop. The result has been a constant supply of loans to credit-worthy individuals and companies in the UK for the past 25 years.
Handelsbanken has been banking in the UK for the past 25 years, but it was really in 2002 that the Bank decided to expand its operations to such an extent that they now call the UK their “fifth home market”. This summer the Bank has committed to establishing 102 branches spread across England - and these are not just clustered around the capital - there’s as many branches supporting businesses in the north of England as in the south.
Having successfully established and maintained its own banking model throughout the Nordic countries, Bouvin had no difficulty explaining to me the reasons why his bank is both profitable and popular. “We seek to build long-term sustainable business and build long-term customer relationships. Since we are a relationship bank and not a transactional bank, ‘know your customer’ comes very naturally to us. It’s something that is an important part of the way we conduct our business.”
Bouvin explains that key to this relationship is the absolute trust Handelsbanken has in its branch managers. These are the people who are charged with identifying new clients. It is the local branch manager who researches each client’s aims, objectives, and aspirations, works out a financial programme that truly supports what the business needs - offering more than the kind of off-the shelf products other banks would want to sell - and then stays with that client through thick and thin. And, it is the branch manager who ultimately decides on the levels of support that Handelsbanken provides. Decisions are not handed down the ladder from some remote head office. There are no instructions from on high telling branch managers what they can or cannot do for their clients. “They are totally self-sufficient and autonomous. This is all to do with our fundamental belief that in order to provide long term customer satisfaction you should be as close as possible to your customers.”
All of the managers running Handelsbanken branches are, themselves, home-grown in that they are local to the area in which their branch is situated. Bouvin describes them as “refugees from the High Street who feel that where they’ve been they were not trusted, they were micro
A local Handelsbanken branch in Chiswick managed, and used to spend a good part of their time doing things that had no value whatsoever for their customers. These are people who have the same ethos as Handelsbanken, caring for customers and wanting to build relationships, and they’ve come to us saying I’d love to open a Handelsbanken branch in Town Y; and that’s when we start discussions.”
A local Handelsbanken branch in Chiswick managed, and used to spend a good part of their time doing things that had no value whatsoever for their customers. These are people who have the same ethos as Handelsbanken, caring for customers and wanting to build relationships, and they’ve come to us saying I’d love to open a Handelsbanken branch in Town Y; and that’s when we start discussions.”
In order to concentrate on the customer, branch managers at Handelsbanken do not have sales targets and no budgets to contend with. Nor is there a bonus structure, with everyone on a flat salary. And in case you are wondering – no, Mr Bouvin does not get a bonus.
Indeed, when I announced to my colleagues that I was about to interview a CEO of a bank who doesn't receive a bonus, I detected more than a whiff of disbelief in the room. Yet after shaking the hand of this unique CEO and taking my leave of Handelsbanken, I couldn’t help but reflect on the singularity of a banking presence in this country that has never been begged to exercise restraint over its executives’ financial remuneration, been implored to unfreeze credit lines to its customers, urged to unlock the wealth banked from quantitative easing, nor needed prompting to build up its reserves.
And by sticking to its own sound business model, it continues to expand its branches, employ more local staff and thereby encourage the business prospects of this country. Indeed as that other Swedish export, Abba, once sang: ‘If you need me, let me know and I’ll be around - take a chance on me”, it appears the British will be taking a chance on Handelsbanken for years to come.
