Sweden Bank Mergers & Acquisitions (Svenska Handelsbanken)

Photo: Svenska Handelsbanken's head office in Stockholm.

Photographer: Bengt Wanselius.  Source: Svenska Handelsbanken's web site, used with permission.

Svenska Handelsbanken AB

In Scandinavian, German and Dutch languages, the word "handel" means a trade or business, as in the chemicals trade or the forestry trade. The name Svenska Handelsbanken, hence, means the "Swedish Commercial Bank". The bank was established in 1871 by eight former directors from rival Stockholms Enskilda Bank who resigned to form their own bank following a board disagreement.  Initially, the bank was called Stockholms Handelsbank, focusing on accepting deposits and making loans to businesses in the Swedish capital. The bank was floated on the Stockholm stock exchange in 1873. 

The bank began to open branches in other parts of Stockholm in 1875.  During the mid-1880s, Sweden suffered a major economic recession due to a real estate collapse.  Stockholms Handelsbank suffered losses, but survived the downturn. 

In 1893, private banker Louis Fraenckel was appointed to the bank’s managing director position.  His tenure lasted until 1911, during which his own private banking operations were amalgamated into Stockholms Handelsbank, allowing it to gain important corporate clients and to expand into the foreign exchange business.  During the 19^th century, branch banking was not a common practice in many countries, and instead of directly operating a network of branches outside of Stockholm, the bank chose to partner with local investors in establishing a number of regional banks to share risk and to optimize local expertise.

However, by the early 20^th century, industrialization has created large corporations with nationwide operations and even multi-nationals that required much larger capital, trade finance and international services.  Small regional banks could no longer serve such ever-expanding industrials.  Waves of bank mergers happened across Western Europe and America, and Sweden was no exception.  In 1914, Stockholms Handelsbank took over Bank AB Norra Sverige. This expanded Stockholms Handelsbanken’s reach to 36 new towns, primarily along the Norrland coast where Sweden’s forestry industry was concentrated. 

Then in 1917, the bank further strengthened its position in the north by acquiring Norrlandsbanken, which had 79 branches.  Before long though, the bank realized that its loan concentration in the Swedish North and forestry industry gave it undue credit risk.  The bank then opened branches in Göteborg and Malmö, and in 1919 expanded to the south by acquiring the 67-branch Bank AB Södra Sverige.   To celebrate this nationwide expansion, Stockholms Handelsbank adopted its current name: Svenska Handelsbanken.

The 1920s and 1930s was turbulent times for the world economy, with asset prices and consumption swinging wildly, and Sweden’s export volumes and economy rode along the roller-coaster ride.  Svenska Handelsbanken on several occasions had to take over the majority ownership of its industrial clients while their bad debts were re-structured.  A famous name that the bank owned for a period of time was telecommunications engineering firm LM Ericsson.  Amidst the very challenging operating environment, the bank took over Mälarebanken in 1926.

The closing months of the 1930s saw the start of World War II when Germany invaded Poland on September 1, 1939, and the subsequent declarations of war on Germany by France and Great Britain two days later.  British Prime Minister Neville Chamberlain had pledged support for Poland back in March 1939, when Germany’s military hostilities became obvious. At the outbreak of conflicts, Sweden declared its neutrality, a move that failed to prevent socio-economic hardship as its western, southern and eastern neighbours (Norway, Denmark and Finland) all fell to Nazi German occupation at the height of World War II.

Situated at a strategic location between Great Britain, Germany, Denmark and the Soviet Union, Sweden’s access to both the North and Baltic Seas were severely curtailed by both the Allied Forces’ and the Axis’ naval blockades, as both sides feared that the other powers would use the pretense of Swedish neutrality to aid their respective war efforts.  Foreign trade in and out of Sweden fell sharply, leading to severe shortages of petroleum, rubber, foods and metal products.  Notwithstanding the economic distress, Sweden did avoid the devastating human toll and physical destruction of other European countries that endured years of battles.

Svenska Handelsbanken continued to strengthen during the 1940s, taking over Norrkopings Folkbank in 1941 and Vänersborgsbanken in 1943.  In 1955, Svenska Handelsbanken acquired mortgage provider SIGAB, which became today’s Handelsbanken Hypotek.  During the rest of the 1950s, it also took over Luleå Folkbank and Gotlandsbanken. 

In 1963, Svenska Handelsbanken became the first Swedish bank to launch a lease-finance and factoring services subsidiary when it established Säljfinans, which became Svenska Finans in 1973 and Handelsbanken Finans in 1991.  The 1960s also witnessed the start of computerization to handle the burgeoning volume of transactions.  Computer terminals at the individual branch level began in 1973, allowing immediate account balance updates for the first time. 

The year 1973 also marked an important milestone for the bank’s management-employee relations, as Svenska Handelsbanken launched a profit-sharing program for its union employees. The funds allocated from the profit-sharing were invested in the bank's shares, which eventually gave the union foundation representation in the bank’s board of directors.

Svenska Handelsbanken’s mutual fund offerings began in 1971 when it acquired a sales agency that handled the “Koncentra” mutual fund series.  That operation evolved into today’s asset manager Handelsbanken Fonder ("Handelsbanken Funds").

The 1980s was tumultuous times in the Swedish economy and banking industry.  Tight regulations that had been in place since World War II on interest rates, credit ceilings, foreign exchange rate as well as the types of savings and loan products that each of the three categories of credit institutions (savings banks, co-operative banks and commercial banks) could provide were gradually removed.  This liberalization policy led to a proliferation of loan volumes, as players in all three credit institution categories tried to grab market share from each other by offering easier and easier credit. Much of the new debt fuelled speculative commercial real estate construction activities, which went bust in 1990 when Sweden was hit by a deep recession brought on partly by the collapse of its traditional export markets in the disintegrating Soviet Bloc and rising interest rates. 

Speculative corporate loans made in the late 1980s suddenly turned sour and Sweden plunged into a severe currency and banking crisis which saw the national government providing SEK 66-billion of state guarantees to prevent a colossal collapse of the banking sector.  The more cautiously-run Svenska Handelsbanken, however, stood out as the only major Swedish bank that did not request any handout from the government. Indeed throughout the 1990s, its capital position was so strong that it acquired ailing banks domestically and in Norway and Finland, both of which suffered their own similar banking crises as Sweden. Outside of the Nordic region, Svenska Handelsbanken considers Great Britain and the Netherlands as its home markets, operating 180 branches and 22 branches respectively (accurate as of 2014). In recent years, the bank has often purposely omitted the “Svenska” part of the formal name, marketing itself as “Handelsbanken” instead.

Recent transaction(s):

• In 1990, Handelsbanken acquired Malmö-based Skänska Banken, which had 76 branches.
• Also in 1990, Handelsbanken bought Norway's Oslo Handelsbanken.
• In 1991, Handelsbanken bought Stavanger Bank of Norway.
• In 1995, Handelsbanken bought the healthy parts of Finland's Skopbank.
• In 1997, Handelsbanken bought Swedish mortgage provider Stadshypotek AB for SEK 23.0-billion (USD $3.28-billion).
• In 1998, Handelsbanken offered NOK 5.09-billion (SEK 5.44-billion, USD $690-million) for Norway's Fokus Bank. However, within days, Denmark's Den Danske Bank jumped into the foray. After a brief but intense bidding war, Den Danske Bank raised its offer for Fokus to NOK 5.815-billion (SEK 6.222-billion, USD $778-million) and won the Norwegian bank.
• In 1999, Handelsbanken bought Norway's Bergensbanken for NOK 1.55-billion (SEK 1.69-billion, USD $200-million). Bergensbanken had 6 branches in Bergen, the second largest city in Norway.
• In 2000, Handelsbanken bought Swedish mutual life insurer and pension fund manager SPP Livförsäkring AB and SPP Fonder AB for SEK 7.1-billion (USD $734-million). The Swedish bank planned to demutualize SPP as soon as feasible.
• In 2001, Handelsbanken bought Denmark's Midtbank A/S for SEK 2.5-billion (DKK 2.05-billion, USD $245-million). Midtbank had a strong presence in Denmark's Jutland region.
• In 2006, Handelsbanken's SPP Liv was demutualized, and surpluses totalling SEK 2.5-billion (USD $326-million) were distributed to the policyholders.
• In late 2007, Handelsbanken sold its Swedish-based insurance and pensions division SPP to Norway's Storebrand Holding AB for SEK 18.2-billion (EUR 2.6-billion, USD $2.62-billion).

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