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Svenska Handelsbanken AB is one of the biggest banks in the Nordic countries.

History of Svenska Handelsbanken

The history of Svenska Handelsbanken goes back to 1871 when a number of prominent companies and individuals in Stockholmmarker'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 Swedenmarker 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 Norrmalmmarker 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 Europe. 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 Göteborgmarker and Malmömarker. 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 war. 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 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 Norrland 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 budgets to be an unnecessary evil. Instead, a new financial reporting and management system was developed based on the actual profit 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, 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 loans 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 Londonmarker, New Yorkmarker and Singaporemarker, 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 Norwaymarker, supplemented by the purchase of Bergensbanken in 1999.

In Finlandmarker, 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 Denmarkmarker, Handelsbanken opened its first branch office in 1996. The opening of the Copenhagenmarker 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 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 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 Storebrandmarker.

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 Britainmarker building a network of 56 branches by the end of May 2008.

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


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