Thursday, 2 June 2011

Forget Virgin Money or Metro Bank, Handlesbanken is the real UK contender

File:Metro Bank logo.png   virgin money logo   

One thing that neither Sir Richard Branson or Vernon W. Hill II can be criticised for is their ability to drum up publicity. Over the last few weeks and months the publicity and positioning that Metro Bank and Virgin Money have had as the contenders to take on the Big 5 banks has been phenomenal. Yet these banks have less than two handfuls of branches between them. Metro Bank opened 25,000 accounts in its first year of operation and ran up losses of just under £25m, or a bit under £1000 per account.

Meanwhile there is a bank with over 100 branches in the UK  that has by far the highest customer satisfaction for both Corporate and Personal banking of any bank in the UK and the highest profitability, that is successfully growing and winning business and that is Sweden's Handelbanken. In typical Swedish style they have done this with little blowing of trumpets, marching bands or publicity stunts, but quietly, unassumingly and very successfully. It is Handlesbanken that the Big 5 banks should really be concerned about, particularly for SME and corporate banking.

So what is it that Handelsbanken is doing that is making them so successful?

Well it isn't providing free dog biscuits, it isn't having cash counting machines that look like fruit machines and it isn't about opening up branches in metropolitan areas where no one actually lives. It also isn't about opening branches that look like night clubs or designer hotels. Handelsbanken isn't about making banking sexy - because at the end of the day banking isn't. Trying to make banking sexy is like painting lipstick on a pig.

Handelsbanken's motto is the 'the branch is the bank'. With a highly decentralised model, the important decisions are all made in the branch by the branch manager. The branch staff don't have sales targets, equally there aren't centrally driven product marketing campaigns, so there is a restoration of the relationship between the customer and the branch. There is no need to deal with someone outside the branch. However you don't get this sort of service and relationship from Handelsbanken without transferring your entire banking relationship to them whether you are an individual or a business. Handelsbanken makes no bones about their goal to be the most profitable bank whilst still being able to have the highest customer satisfaction.

When Handelsbanken moves into a town then they ensure that they become part of the community. The bank manager is expected to live in the town and be visibily part of the community. (More challenging when you open a flagship branch in Holborn where virtually no one lives)

The Handelsbanken model will clearly not work for everybody. A branch-based model is certainly more expensive to run than a direct bank (like Virgin Money is, for the moment). Equally as more and more customers expect to be able to do their banking online and remotely then the Handelsbanken model and indeed the Metro Bank model will be attractive to a smaller and smaller market. However as long as there are customers who value a personal service from their local bank then Handelsbanken will quietly continue to be a success.

As the Big 5 banks continue to face pressure from all angles to lend more money, improve customer service and be less avaricious, rather than fearing the noisy upstarts like Metro Bank and Virgin Money they should be looking over their shoulders for the Swedish Weeping Angels are just behind them. Weeping Angel 3.jpg


  1. Great bank. Empowered approach putting the customer first is winning formula.

  2. Agree. They don't just pay lip service to Treating Customers Fairly (TCF) by ticking a few boxes and sending out a corporate newsletter once a quarter, these guys actually believe in TCF - they live and breathe it!

  3. The concern is what are the long term prospects of a branch-only bank that doesn't offer the convenience of online and mobile banking, however brilliant the service?

  4. A very different model with Handelsbank. It is not trying to leverage the difference in interest rates between the UK and its own domestic markets as the Icelandic banks were. This is a Swedish bank genuinely conducting business in the UK.

  5. @SE9 a quick look at Handelsbanken credit rating and you'll see that it's one of the best in Europe. Unlike many European banks, it never resorted to it's shareholders or the financial markets for support during the recent/current recession. Furthermore, Handelsbanken was recently rated as the second strongest bank in the world and has the lowest credit risk of all European Banks - according to Bloomberg. In short if Handelsbanken were to fail, it would be a long time after Barclays, Lloyds HSBC, Santander and RBS.

  6. Handelsbanken do offer online banking.

  7. No I wouldn't put it in that category at all. It is a full service bank with a strong focus on SME and business banking that is focussed on branch-based relationship banking.

  8. Perhaps that you are right. They certainly do NOT have an on-line savings and deposit-taking business specifically for deposits from GB or the UK, unlike the Old Icesave/Landsbankinn nor the Dutch ING (Internationale Nederlanden Groep).

    I must say that I am still slightly uncomfortable with the notion and the idea of banking with a probably entirely cashless bank that would not even have a paid-to-use cash machine, as in many corner shops; not that I would ever have enough of personal net worth or have a good enough of a credit history to be accepted as a customer in any time soon.

    Would it be appropriate to put and to categorise the British branches of the Swedish Svenska Handelsbanken Aktiebolag in the same category as the "Church House" old private-banking arm of Virgin Money, Coutts & Co. of NatWest, the Adam & Co. of the RBS, Harrods Bank or the deposit-taking side (supposing that it did have one) of the former Barings Bank?!

  9. With Icesave/Landsbankinn and Kaupthing/Kaupþing, can we really in the present time trust another Nordic and Scandinavian Bank?! 


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