Handelsbanken Investors Demand More Transparency From Swedish Bank

(Bloomberg) — In the fall of 2023, as Svenska Handelsbanken AB was searching for a new chief executive officer to replace the departing Carina Akerstrom, bank executives told outside staff conducting the search that they wanted someone who would continue its push to invest in technology and make the Stockholm-based lender’s culture more open and transparent.

Instead, Handelsbanken’s board of directors chose Michael Green, who was then managing director of the bank’s operations in Sweden. He is seen as the preferred candidate of Par Boman, a conservative operator and the bank’s chairman, people familiar with the matter said. Green took over in January 2024 and nixed many changes Akerstrom had planned, sources said.

Green’s choice reflects Handelsbanken’s priorities, according to sources familiar with the Stockholm-based bank’s management, who spoke on condition of anonymity because they were not authorized to comment publicly. The bank has been slower than rivals to invest in high-growth businesses or technology; It chose to stick to a more conservative strategy on branch-based lending, mortgages and other products with declining profitability. While the bank is seen as a steady bet in tough markets, it generates less profit for investors than its peers and its shares are lagging, making the lack of transparency even more frustrating for some shareholders.

“Handelsbanken is Sweden’s most tight-lipped and conservative bank,” said Sverre Linton, chief legal officer and spokesman for the Swedish Shareholders Association, which represents small stock investors. “They are not as open as other shareholder-owned companies and they adhere to outdated practices.”

Handelsbanken spokesman Mats Olsson, who declined to comment on behalf of Boman and Green, said the lender “complies with the Swedish Code of Corporate Governance and has strict processes and routines that follow these rules, including the way senior executives are appointed.”

Other major Swedish banks, including Swedbank AB and SEB AB, pulled out of unprofitable foreign retail ventures years ago and expanded into funds, cards and corporate services. Handelsbanken instead turned to small-scale operations in Norway, the United Kingdom and the Netherlands, where it struggled to gain market share.

The bank has long relied on its branches to generate business, offering relatively simple loan products to a loyal customer base. Although this helped avoid the credit losses suffered by rivals during the financial crisis, margins in this business fell and the bank was slow to expand into more advanced products. Over the past two decades, Handelsbanken has spun off much of its once-powerful investment banking arm but has not invested much in high-return businesses such as asset management.

“Under Chairman Boman, the bank was steered in a defensive direction and missed opportunities,” said Peter Magnusson, head of asset management at Cicero Fonder, Handelsbanken’s minority shareholder.

Handelsbanken shares have performed worse than their peers over the past six years, rising just 22%; in comparison, SEB gained almost 90%, Nordea gained 75% and Swedbank gained more than 65%.

Handelsbanken concentrates mainly on Swedish mortgages, tenant-owner associations and commercial real estate loans; It’s a model that was highly profitable under previous Basel capital rules but became much less profitable after regulatory changes that increased capital requirements. As income from fees, asset management or payments is limited, the bank’s earnings shift towards lower-margin net interest income.

In a note published in September, Citi analysts highlighted that nearly three-quarters of Handelsbanken’s revenues come from net interest income, making its earnings particularly vulnerable in a rate-cutting cycle with little competition from both incumbents and new entrants and little hedging support. Handelsbanken has lost much of the branch advantage it once had and is ranked poorly in digital services, leaving it in a weak competitive position, analysts said. Citi was particularly pessimistic about the Swedish lender, describing it as currently one of the least attractive banks in Europe.

Handelsbanken’s return on equity is the lowest of Swedish banks and is expected to reach a low of around 11% by 2026, Bloomberg Intelligence analyst Mar’Yana Vartsaba said in an August note.

“The bank still needs to improve its profitability relative to its peers, which requires further investment in staff and systems that support capital-light returns,” said SEB analyst Andreas Hakansson.

The bank’s more disciplined approach also has positive aspects. It has one of the strongest credit profiles in the industry, with recoveries accumulating since mid-2020 and losses well below peers. Kepler Cheuvreux equity analyst Markus Sandgren said its cautious stance may limit profitability but makes the bank a reliable defensive play when markets become unstable. “They are extraordinarily strong on credit risk; they are a bank investors can trust in turbulent times,” he said. But Sandgren rates the bank “underrated,” predicting that investors will look for higher-yielding assets as the business cycle improves.

Bloomberg research shows Handelsbanken receives more sell recommendations from analysts than its peers; It has 12 sells and 11 buy-and-holds, compared to Swedbank’s seven sells and 16 buy-and-holds and SEB’s five sells and 18 buy-and-holds.

Handelsbanken press officer John Zanchi said the bank “thinks it’s good to be different. Our decentralized business model emphasizes growth through recommendation rather than mass market communications.”

Green has been cutting costs since taking over as CEO, with a total of 976 staff and contractors leaving the bank by the end of the first quarter of 2025.

The business has a growing footprint, and that’s confusing some shareholders. Handelsbanken owns a commercial media company called EFN, which started as an in-house TV channel in 2011 and was rebranded and launched as a wholly owned subsidiary in 2013.

Akerstrom had decided to close EFN in 2023 in the last few months of his term, according to people familiar with the situation who requested anonymity during private conversations. It broadcasts Swedish economic and financial news from two floors of an office building shared with Handelsbanken Capital Markets in Stockholm, but the then-CEO had decided it was of little strategic value to the bank.

Akerstrom did not respond to requests for comment.

EFN costs Handelsbanken about 100 million kroner ($10.4 million) a year, according to an April 2024 report by business magazine Dagens Media. Given recent hires, this sum is likely to have increased, but it is still small next to Handelsbanken’s total expenses, which have risen to 25 billion crowns in 2024 from 23 billion crowns the previous year.

EFN CEO declined to comment and referred Bloomberg News to the Handelsbanken press office. Zanchi said EFN is part of the bank’s social inclusion efforts and its mission is “to disseminate knowledge about the economy and society to a broader audience, thereby strengthening people’s ability to make their own well-founded decisions.” Handelsbanken refused to say whether EFN’s budget was allocated or discretionary, to provide any details of its financial structure or to comment on its costs or salaries.

Investors and analysts said they were more concerned about the bank’s reluctance to explain its strategy than the amount of money Handelsbanken was spending on EFN. Some have asked bank management about the media company in the context of broader discussions about a perceived lack of transparency at Handelsbanken.

“No one has given a clear answer as to what EFN actually does or why it should be run within the bank,” Linton said. “Handelsbanken has chosen to keep the mystery around EFN alive. And this is the bank’s choice. But this leaves shareholders like me asking the question: what is the plan?”

Handelsbanken’s conservative approach is rooted in unconventional shareholding structures and the influence of Boman, who has more power over strategy and personnel than most presidents, people familiar with Handelsbanken management say.

Handelsbanken declined to comment on what spokesman Olsson called “speculations or rumors.”

The bank’s most powerful shareholder is Industrivarden, controlled by Fredrik Lundberg, one of Sweden’s most influential investors. Industrivarden, which had an 11.8% stake as of August 29, is majority owned by LE Lundbergforetagen AB, which is controlled by Lundberg. Lundberg declined to comment.

Alongside Industrivarden is a bloc of in-house foundations that preserve the bank’s traditions and internal values; The most prominent of these is the employee profit-sharing foundation Oktogonen, which is the second largest owner of Handelsbanken with a stake of approximately 8%. Originally designed to align staff for long-term performance, Oktogonen has become one of the bank’s most influential stakeholders and a powerful force for continuity, sources familiar with the bank’s management said.

Executives who tried to push for change, such as Frank Vang-Jensen, who was CEO from 2015 to 2016, had relatively short tenures at the bank, the sources said. Vang-Jensen declined to comment.

Vang-Jensen, who wanted to move away from the branch-based model and reduce the size of the network, was dismissed less than 18 months later. Boman, chairman of Handelsbanken, said the role was “very big” and “very difficult” for Vang-Jensen.

Vang-Jensen has since become chairman and CEO of Nordea Bank Abp, the largest bank in the Nordic region by total assets. Under Vang-Jensen, Nordea has cut costs, invested heavily in technology, artificial intelligence and cybersecurity, and expanded its footprint, including its acquisition of Danske Bank’s Norwegian personal shopper and private banking business in 2024. Nordea increased its revenue and market share during his tenure; Reached the top three market positions in loans and deposits in Sweden, Denmark, Finland and Norway.

“The manner in which Wang-Jensen was dismissed was extremely harsh,” said SEB’s Hakansson. “Ironically, he has since proven his ability at Nordea, where share prices and return on equity have increased while Handelsbanken has made little progress.”

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