countrymum;152017 wrote:Bulldog Drummond;152016 wrote: Thanks, it's behind a paywall.so I can't read the article.
But will take your word that it's a very odd bank :)
Here's a copy & paste of the article
Handelsbanken is championing an old way of doing new UK business
Svenska Handelsbanken is not just a bank. To its admirers it is an entirely different way of doing business.
Talk to anyone who has spent time looking at what makes it tick and they will speak of its operating model with a quasi- mystical fervour.
To say the bank is different is an understatement. Its model is about as far away from those used by Britain’s major banks as it is possible to get. But here is the thing: it is phenomenally successful. Not just a little better than everyone else, but a lot.
Three years ago, stock market analysts at Sweden’s main business paper set about using data from the London School of Business to find the world’s best performing share since the start of the 20th century.
The answer? Handelsbanken. Ten pounds invested in the Swedish bank in 1900 would have been worth about £20m by 2009, a rise of 1.9m pc. General Electric could manage only an 843,000pc rise.
And if you think the fruits of this astonishing return were limited to an elite club at the bank, you would be wrong.
Handelsbanken has an almost religious devotion to Oktogonen, its profit-sharing scheme. The principle is simple. Every employee receives an equal share of the bank’s profits as long as it makes a return on equity greater than the average of its peer group.
The money is then used to buy Handelsbanken shares for each staff member – but these can be accessed only when employees reach the age of 60. This ultra-equitable approach means the bank teller whose career is spent cashing cheques will receive the same payout from Handelsbanken on retirement as its chief executive.
Today, the payout for a lifelong member of the scheme is reckoned to be well north of £1m before tax, given the bank’s 41 consecutive years of better-than-average returns.
And if you think that does not set the bank sufficiently apart from its UK counterparts, here are a few other differences:
- It does not pay bonuses, with the exception of a small number of staff in its investment banking arm;
- It has no financial plans;
- The bank sets no sales targets for staff;
- It does not set out long-term goals and has no central marketing budget;
- Even its largest corporate customers must still bank with it at a branch level, and it has no credit scoring system.
Entering the head office of the bank’s British business, the most notable feature is the small number of staff.
As Anders Bouvin, UK chief executive of Handelsbanken, explains, this is no accident and is a direct function of the way the bank is run. “We have a process in the bank where branches decide the costs of the head office. They scrutinise our costs. If they are not happy with the service, they make sure the head office ups their game and, if not, they can go elsewhere. The branch manager is the king of the bank,” he says.
Being “king of the bank” is not just a turn of phrase, but an accurate description of the extraordinary power that Handelsbanken invests in each of its local managers. Indeed, its corporate motto is “the bank is the branch”.
Using its “church spire” principle, managers have total authority within their local area to decide on every aspect of how the bank is run, handling everything from credit decisions to how much they should spend on advertising. In a banking industry in which the orthodoxy is that as many processes should be centralised as possible to cut costs, Handelsbanken has taken a diametrically opposite approach.
If you receive a letter from Handelsbanken, it will have been sent from your local branch. If you make an online payment, the local branch will handle that, too. Branches will even try to source all their services locally, meaning that the letter you receive will most likely be written on stationery bought nearby.
In short, no Handelsbanken customer will ever deal with a call centre, unless of course a branch manager had decided to outsource the helpline, but that just would not happen.
Andreas Håkansson, a Stockholm-based banking analysts at Exane BNP Paribas, says the customer experience at Handelsbanken is unlike anything found elsewhere among major British banks.
“I lived in the UK for many years, and I can tell you the service you receive is on a completely different level.
“You can walk into a branch in Sweden and you are greeted by educated people and there are none of these glass barriers,” he says.
Despite his enthusiasm for the bank, Mr Håkansson rates Handelsbanken shares only as a “hold” and perhaps surprisingly, given its record of outperformance, only one of the 32 analysts covering the bank has a “buy” recommendation on it. Niels Kroner, a former McKinsey consultant, admits that it can take rival bankers and City analysts a while to understand Handelsbanken.
“It’s not a model you can take on lightly and the benefits that you get from it take a long time to come through, so I can’t see many following their example,” says Kroner, who has written a book on Handelsbanken entitled A Blueprint for Better Banking.
Until 1970, Handelsbanken was run just like most other banks. Throughout the 1960s it absorbed all the fashionable management techniques from the US banking industry and was operating more or less the same universal model that most large lenders run today.
However, a spate of scandals, including controversial foreign exchange trading, led to the resignations of Handelsbanken’s senior management and in 1970 the bank hired Jan Wallander, then the head of a small lender in northern Sweden, as its managing director.
An academic by background, Wallander undertook a radical overhaul of the bank, devolving most of the board’s executive powers down to the bank’s branches, in the face of protests from many managers. The legacy of this is that Handelsbanken remains immune to the urging of outsiders telling it how to improve its business.
“The whole ethos of the bank is around customer satisfaction. We have met all the same consultants who tell us we should open call centres and close branches. I remember after one meeting we turned over the paper and asked ourselves 'Will our customers appreciate it?’ and we decided they wouldn’t,” says Bouvin.
He adds: “We haven’t fallen into the trap of short-termism. If you sell a product to a customer that they don’t actually want, they are not going to be satisfied and they won’t do business with you again.”
In the years before the financial crisis, the pressure on Handelsbanken to move with the times grew intense. The past five years have vindicated its way of doing business. Even by Swedish standards, the bank’s loan loss rate is exceptionally low. At the end of 2012, non-performing loans constituted 0.43pc of its total loan book, roughly a quarter of the proportion at Nordea, a Swedish rival, and less than a tenth of the level of many of its European peers.
A consequence of this is that its funding costs are among the lowest in the banking sector. Insuring its debt is cheaper than for any British lender and is less expensive than buying protection against a French default.
Risk aversion has not hindered its returns. Data provider SNL Financial found Handelsbanken made the highest return on equity last year, 14.8pc, of any European retail bank. The comparative figure for HSBC was 8.8pc, while Spain’s Santander made a return of just 3.9pc.
Since April 2008, when it had 60 branches in the UK, the bank has expanded at the rate of roughly one new opening every eight days, taking its current total to 161.
Handelsbanken’s offering has proved attractive to a range of businesses and individuals looking for an alternative to the established lenders.
Wealthy Britons have been some of the most enthusiastic customers. In smart circles, a Handelsbanken account now carries the same cachet as one from Coutts did in the past.
“The City arrivistes yearn for their leather Coutts chequebook, a Range Rover and a Barbour jacket, but the old money has put on a Schoffel [ski jacket], and driven off to Handelsbanken in their Toyota Land Cruiser,” says one banker.
It is not just among the aristocracy that Handelsbanken is making waves; a recent survey by the Federation of Small Businesses found the lender had the best name recognition among SMEs of any “challenger” bank.
Part of the attraction is Handelsbanken’s near-obsession with preserving its independence – so much so that it refuses to access any of the Government’s funding schemes.
“We believe a bank should be able to operate without the need for any government support. We don’t need this money and we don’t want in any way to be perceived to be taking any kind of support,” says Bouvin.
Handelsbanken’s approach has attracted admirers in Westminster. Last week, Labour’s shadow business minister, Chuka Umunna, visited the bank’s branch in the West End of London.
“We want to see more banks that look like Handelsbanken,” says Umunna, who admits he is considering switching his own account to Handelsbanken.
But the bank’s rapid UK expansion worries some of the lender’s long-time followers. At present, the UK is about one-eighth the size of its Swedish business. However, the bank has indicated it believes its British unit could one day rival its home market in size.
“If I have one worry about Handelsbanken, it is the pace of UK growth,” says Håkansson.
With Royal Bank of Scotland set to launch a strategic review under new chief executive, Ross McEwan, the New Zealander could do worse than beat a path to his local Handelsbanken branch and see how another scandal-hit bank created a business that is the envy of many of its rivals.