Illustration by Martin O’Neill for Boldness in Business 2015 special report
© Martin O’Neill

It was just before Christmas last year and if the stress of moving house was not enough for Alan Knight, a corporate responsibility executive at steelmaker ArcelorMittal, he was also working hard on the international response to the Ebola outbreak.

He was about to head off to New York for a meeting at the UN but was under pressure to complete his house move. So his bank manager at Handelsbanken, the Swedish lender, drove from Portsmouth on the UK’s south coast to London’s Heathrow airport with the paperwork. “We spent an hour in Starbucks going through the details, then I signed and caught my flight. Two weeks later I moved in,” says Knight.

It is a story that is testament to Handelsbanken’s singular focus on the needs of the customer. Many other companies talk about putting the customer first but few have the Swedish bank’s track record.

In Sweden, Handelsbanken is known as a traditional and conservative bank. Whereas the other three big domestic banks have all been closing branches and stopping cash handling in the ones that remain, Handelsbanken has kept it and is opening more branches.

It stands by its principles: never to accept any form of government aid even when cheap money is on offer with no strings attached; not to set budgets for its branches; and not to pay its workers bonuses.

It operates instead on what it calls the “church-spire principle”, a model it has followed since the 1970s under which each branch is given total freedom to decide how to deal with its customers. Perhaps not surprisingly, Handelsbanken has enjoyed strong growth recently in what was widely seen as the over-banked UK market.

Anders Bouvin, the bank’s UK chief executive, says: “What is important is what Handelsbanken means to our customers, what it represents.”

He says the bank has had a number of core principles over the past four-and-a-half decades. “One is customer service transferring into customer satisfaction. The second is building a bank around what customers want,” he says, adding a third is to be thrifty and cost-conscious.

An example of the customer-centric view is found in the UK, where nearly all banks have flocked to set up call centres. Not Handelsbanken. “We are always taking the outside-in view,” Bouvin says. “When call centres were in vogue we always looked at this from a customer’s point of view and said this won’t add value for our customers.”

Instead, customers have their bank manager’s mobile phone number and can call at any time. That manager remains their main point of contact in all their dealings with the bank, and they are not forced to deal with centralised departments for loans, for example.

That focus on the customer extends to the top. Pär Boman, the chief executive who guided Handelsbanken through the financial crisis, spends a day or two a year serving customers in a branch. He puts an “under education” badge on, and finds out what customers like and dislike.

The model has caught the attention of investors, regulators and analysts around the world. Since the 2008 financial crisis it has delivered a higher total return to shareholders than any other big European bank. Analysts at Berenberg, a German investment bank, call it “the blueprint for banking in Europe”.

Andy Haldane, chief economist at the Bank of England, called Handelsbanken’s business model “back to the future” as the Swedish bank has both some of the highest capital ratios and the highest returns in European banking. “Its business model is fascinating, Quaker even, in its orientation,” Haldane has said.

Handelsbanken executives like to say they take conservative banking and give it a modern twist. “I wouldn’t say [we are] old-fashioned. Our values are traditional and even timeless,” says Bouvin.

The modern part comes in several different ways. Despite all the branches, Handelsbanken has not neglected the digital side of banking. Boman stresses how the combination of smartphone apps and branches allow it to lower costs and boost efficiency.

He also talks about some unusual role models for a bank, especially when looking at its rapid expansion in the UK — the likes of fashion retailer H&M, for example. It started a video channel on its website that became very popular as customers told it this was how they liked to receive news. “We’ve never been so modern,” Boman adds.

A slice of modernity that Handelsbanken did not welcome was when it found itself in the slipstream of a recent storm over excessive use of private jets that rocked corporate Sweden. This caused upheaval at holding company Industrivärden, the bank’s main shareholder. Boman is to become chairman of the bank after Anders Nyrén, the current Industrivärden chief executive, gives up his role in the Handelsbanken chair. Frank Vang-Jensen will become the bank’s chief executive.

Handelsbanken’s big UK expansion came from about 2007, just as its Swedish rivals were ploughing into what were seen as the growth markets of eastern Europe and the Baltics. The latter succumbed to the financial crisis and many Swedish banks had sleepless nights in 2008-09. Handelsbanken sailed on, relatively serenely, and is close to having 200 branches in the UK, four times as many as in 2007.

The differences between Handelsbanken and others go deeper. Whereas many bank executives have recently spoken out against excessive regulation, Boman has not joined in. “We always respect the capacity of parliaments in different countries. I don’t think it’s our role to have an opinion on whether the democratic system has taken the right or wrong decision,” he says. “We see regulations more as a signal system from parliament on how we want banks to behave.”

In general, bonuses are not paid. Instead, every year that the bank’s return on equity beats rivals staff are awarded an equal share of profits. These profits flow into Oktogonen, a foundation that owns more than 10 per cent of Handelsbanken’s shares. The catch is that nobody can withdraw any money until they turn 60.

“The reason we don’t do bonuses is that it’s not compatible with our long-term customer-centric way of running our organisation. If you are to take customer satisfaction seriously, if you really believe that customer satisfaction is the main reason for achieving superior results, you really have to eliminate any kind of steering mechanisms that could push one of your employees to do something that is not in the interest of customers,” Bouvin says.

Underlying all this is a belief that a bank should not be a drain on society but a helper, providing credit to people and businesses. It underscores why Handelsbanken is keen to avoid taking help from governments.

“In order for our branches to succeed in their communities and gain the trust of people, it is very important we behave in a responsible way. The ethos of the bank is: a bank should be an asset to the community, not a liability,” Bouvin says.

That approach can attract criticism from rivals — one privately called it “the Taliban” for its fundamentalist views after it refused to join a government funding scheme after the financial crisis.

Boman is aware Handelsbanken is unlikely to remain flavour of the month for ever. He likes talking about the sweep of history, often referring to the 140 years of board minutes that lie in the basement of its Stockholm headquarters. The main lesson he draws from them is that about every 17 years there is a financial crisis.

“Depending on the fact that the business cycle is so long, and memory is not always so long, we know we have to prepare ourselves for bad times and when you start doing that you do not always have this huge support from the stock market,” he says.

Handelsbanken goes to some lengths to mitigate the effect of any crisis. Senior managers look through the entire loan portfolio four times a year and see all documentation for loans greater than SKr1m ($120,000). They also analyse every credit loss of more than SKr5m. The bank holds enough liquidity to be able to make all its outgoing payments for two and a half years without access to the market.

Boman says the lack of state aid and little marketing mean growth is a slower than it could be. “On the other hand, you can grow with stability,” he adds.

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