Sweden's largest bank
2007 was another successful year in Sweden for Swedbank. In two separate surveys Swedbank was named the most popular employer in the Swedish financial market. Market shares in the important mortgage market continued to rise. Swedbank’s position in the corporate market was further strengthened.
| Swedish Banking is Swedbank’s dominant business area,comprising a network of 459 branches. The cooperation with the savings banks and partly owned banks adds another 261 branches. This gives Swedbank the largest branch network in the Swedish market. Responsibility for Swedish customers rests with the local bank branches, special business units and private banking units in the four regions. Of the business area’s 6,200 full-time employees, around 4,900 are in the branch network. |
| The business area also includes the telephone and Internet bank. The Customer and Product Offerings unit produces and coordinates offerings for various customer groups and is responsible for the development and launch of new products based on customer needs. The unit acts as a link between the banking operations and product companies. |
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Swedish Banking operates in a mature market. Future success will require continuous improvements in customer value. Surveys show that personal contacts and a local presence are the decisive factors when people choose a bank. More Swedes are conducting their day-to-day banking online, while using a personal contact at their local branch and the telephone for specialized advice. Thanks to its broad-based market presence, Swedbank’s retail operations in Sweden have the strength to meet a range of customer needs – from easy to use everyday banking services to sophisticated advice.
Growth strategy
Swedbank’s strategy in Sweden focuses on:
- Growth by reallocating resources to geographical areas with high economic growth, to customer segments with high economic growth and to financial services with high, long-term economic growth
- Attractive customer offerings, including through a wide distribution network in cooperation with savings banks, and by being a service leader that is accessible, easy to work with and proactive
- Decentralized decision-making and a local presence.
Swedish Banking is distinguished by its high profitability, a low risk profile, cost efficiency, high market shares, satisfied customers and motivated employees.
Investments in the Internet, competence development, process and cost efficiency, security solutions, risk control, product development and control systems are imperative if Swedbank is to retain and improve its leading position in Sweden.
Structural changes
As part of the continued commitment to private banking and asset management services in Swedish Banking, responsibility for local stock desks with some 50 brokers in total was transferred from Swedbank Markets to Swedish Banking at the beginning of the year. Comparative figures have been restated so that the stock desks are also included in the figures for Swedish Banking for 2006.
Swedbank sold its holding in the card processing company CEK AB to EDB Business Partner during the year.
During the fourth quarter, Swedbank Babs acquired all the shares in the development company Zamsos, which has developed the next-generation of systems for chip card payments.
The strategically important cooperation with savings banks in Sweden was further expanded during the year. In the first quarter, Swedbank acquired the remaining 60 percent of the shares in Söderhamns Sparbank from the Söderhamn Savings Bank Foundation for SEK 117m. The difference between the purchase price and acquired equity according to the subsidiary’s accounts has essentially been allocated to assets which are depreciated through the income statement. Söderhamns Sparbank, with two branches and 27 employees, was merged with Swedbank during the third quarter.
In the fourth quarter, Swedbank signed an agreement to sell its Lerum branch to Sparbanken Alingsås and its seven branches in the municipalities of Osby and Hässleholm to the newly formed regional savings bank in northeastern Skåne, which was created through the merger of Kristianstads Sparbank and Tyringe Sparbank.
Satisfied private customers
Swedbank is Sweden’s largest bank serving private individuals, with more than 4.1 million such customers. Around 700,000 of them have a personal advisor and another 20,000 are customers of one of the bank’s successful and expanding private banking units. The dialogue with an advisor gives customers more confidence to manage their personal finances.
In the Swedish Quality Index’s annual survey of customer satisfaction among banks, Swedbank fell slightly for the first time since 2001, to a rating of 70.4 (71.2). Swedbank still has the second-most satisfied customers of any of Sweden’s major banks. The goal is naturally that Swedbank should have the most satisfied customers of all.
Increasingly satisfied business customers
Swedbank is also Sweden’s largest commercial bank and does business with 275,000 companies around the country. In addition, over 120,000 organizations and associations as well as the majority of the country’s municipalities and county councils are customers of Swedbank. In recent years, the bank has systematically improved its position in the corporate market. In 2007, it placed second in a survey to name the Commercial Bank of the Year.
In the Swedish Quality Index’s annual survey of customer satisfaction, Swedbank raised its rating by 2.3 index points to 70.7 (68.4).
Leading the mortgage market
Total lending volume amounted to SEK 867bn at year-end, an increase of SEK 105bn or 14 percent in one year. The market share for the portfolio of household lending amounted to 26 percent (269), while the market share for new lending rose to 28 percent (25). The market share for the portfolio of commercial lending declined to 21 percent (22).
Swedbank consolidated its leading position in the strategically important mortgage market. Swedbank Mortgage’s lending to private persons rose by SEK 47bn, or 12 percent to SEK 426bn. Its market share for the existing portfolio and new loans was 30 percent (30). In total, Swedbank Mortgage raised its lending to SEK 561bn (510).
Bank lending to private individuals (consumer credits) increased by 7 percent to SEK 45bn.
Growing corporate and finance company lending
Corporate lending by the bank increased by SEK 45bn or 26 percent to SEK 220bn. Lending by the finance company also continued to grow in 2007. Lending by Swedbank Finans increased by SEK 3bn or 12 percent to SEK 30bn. The finance company has a market-leading position, most notably in the agricultural, forestry and contracting sectors as well as in consumer loans and fleet management.
Higher market shares for Swedbank Fastighetsbyrå
The brokerage agency Swedbank Fastighetsbyrå consolidated its leading position in 2007 by increasing its market shares in the single-family-home and condominium segments. As a result, the agency and its franchisees were able to preserve their profitability.
Swedbank Fastighetsbyrå generated commission revenue of slightly over SEK 1.3bn (1.1) in 2007. During the year, 35,000 (30,000) properties were sold for a total of SEK 42bn (33).
Swedbank Fastighetsbyrå has strengthened its resources in terms of personnel, 1,100 (1,000), and the number of franchised offices, 225 (215). The strategy to follow customers through the entire real estate process is continuously fine-tuned. In addition to greater resources and a full-service offering, active marketing, in combination with higher demand in growth areas and relatively low interest rates, contributed to the positive trend.
Value-added through property and casualty insurance sales
Customers who finance their mortgages and automobiles through Swedbank appreciate also being able to insure their property conveniently. After a successful trial period in 2006, Swedbank’s product range was permanently expanded in 2007 to include insurance for primary homes, second homes and automobiles. A total of 19,600 (6,400) policies were sold during the year.
Strong interest in bank savings and index-linked bonds
Total savings and investment volumes, excluding holdings in customers’ brokerage accounts, amounted to SEK 584bn at year-end, an increase of SEK 43bn or 8 percent during the year. Fund and insurance withdrawals exceeded new contributions by SEK 9bn, net. The market’s poor performance reduced the value of fund and insurance investments by SEK 4bn.
Swedbank’s market share for new household savings through its own sales organization increased to 18 percent (17).
Swedbank’s attractive savings offering, which includes the Future Account (a secure, long-term form of savings with a slightly higher interest rate than several other accounts) and E-Savings Account (with a high interest rate and unlimited withdrawals) contributed to an increase in household deposits of SEK 38bn or 22 percent to SEK 213bn. Swedbank’s market share for household bank deposits was 26 percent (26). Commercial deposits increased by 3 percent to SEK 95bn. Its share of bank deposits in the commercial market was 16 percent (15).
New sales of index-linked bonds remained high. The net increase in the outstanding volume was SEK 6bn to SEK 24bn.
Fund marketplace
During the year, Swedbank attracted attention through the launch of an online fund marketplace, where customers have access to information, news and analyses and can trade a large number of funds from various fund management companies.
Due to turbulence in the global financial market, many customers sold shares in equity funds in favour of other forms of savings with lower risk.
Long-term pension campaign
In fund-related pension savings Swedbank strengthened its market position for both retail and corporate customers. Pension advice has become an integral part of customer service at branches and through the telephone bank.
From cash to cards
The increasing use of debit and credit cards as a replacement for cash continued during the year. Swedbank is Sweden’s largest card issuer, with 3.5 million (3.3) bank cards. In 2007, the number of card purchases climbed 17 percent (17) to 492 million. Extensive security routines and transaction systems have improved service for customers while, at the same time reducing fraud losses.
As the industry’s leading card issuer, Swedbank was the first bank in Sweden to offer its customers the option of designing their own bank cards. Designs are selected by the customer online using one of their own photographs or an image from Swedbank.
Debit and credit cards are managed by EnterCard, which is partly owned with Barclay Card. During the year, the number of cards issued by EnterCard increased by 35 percent to 1.3 million.
Swedbank is the Nordic region’s largest processor of card transactions for business customers and one of the largest processors of Visa transactions in Europe. In 2007, the number of card transactions cleared by Swedbank Babs increased by 19 percent (22) to 770 million.
Increased accessibility
In connection with the launch of the new Swedbank brand in October 2006, the bank extended the business hours at over 50 branches until 6 pm on weekdays. Customer reactions have been very positive and further branches increased their hours in 2007.
In early 2008, Swedbank further improved accessibility by becoming the first bank in Sweden to open on Saturdays. Initially selected branches in Stockholm, Gothenburg and Malmö will be open from 11 am to 3 pm.
Higher sales through Sweden’s largest telephone bank
The telephone bank with personal assistance is being transformed into a professional advisory and sales organization that proactively suggests services based on customer needs, at the same time that the Internet bank is taking over a larger share of customers’ routine questions and transactions. The number of telephone bank customers who use the self-service option rose by 7 percent to 2.5 million, and the number who uses personal assistance climbed 9 percent to 2.1 million.
Continued growth for Sweden’s largest Internet bank
Expanded functionality was launched during the year to make it easier for customers to do their banking online. New financial information and electronic notices were added. The number of customers who use the Internet bank increased by 13 percent to 2.5 million, of whom 0.6 million are customers of savings banks and partly owned banks. Of the customers who have registered for the service, 0.2 million are businesses. The number of logins also rose, and the average customer is handling more transactions through the Internet bank.
Basel 2
In 2007, the new Basel 2 rules were introduced for external capital adequacy reporting as well as internal controls and monitoring of the Swedish operations. The lower capital allocation to Swedish Banking in 2007 is due to the lower capital requirements necessitated by the new internal risk classification method. Retail exposures in particular have significantly lower capital requirements according to the Internal Ratings-Based Approach ("IRB").
Covered bonds
During the year, Swedbank Mortgage received permission from the Swedish Financial Supervisory Authority to issue covered bonds. Swedbank Mortgage intends to convert its existing funding to covered bonds in the second quarter of 2008. The aim is to obtain the highest rating on its covered funding.
New head of Swedish Banking
In December, Kjell Hedman was appointed head of Swedish Banking.
PROFIT TREND
Profit for the year declined by SEK 132m to SEK 6,182m. The return on equity improved to 23.2 percent (22.3). The cost/income ratio was 0.51 (0.51). Income increased by SEK 731m or 4 percent to SEK 17,678m.
Net interest income increased by SEK 233m or 2 percent to SEK 11,701m. Further increases in deposit and lending volumes raised net interest income by SEK 1,304m. The lending margin decreased by 14 bp to 0.86 percent, which reduced net interest income by SEK 1,135m. In terms of deposits, the interest margin improved by 24 bp to 1.30 percent mainly due to a higher repo rate, which positively affected net interest income by SEK 703m. Other effects were SEK 639m lower.
Net commission income increased by SEK 330m or 8 percent to SEK 4,504m mainly due to higher income from payment services as well as mutual fund and insurance operations.
Net gains and losses on financial items at fair value decreased by SEK 73m to SEK 335m mainly because lending, funding and derivatives were marked to fair value by Swedbank Mortgage.
The share of profit or loss in associates increased by SEK 101m to SEK 331m. Partly owned banks and EnterCard reported profit improvements.
Other income increased by SEK 140m to SEK 807m mainly due to income from the sale off CEK AB and income from Swedbank Försäkring related to a surplus from the loan protection product.
Expenses increased by SEK 302m or 3 percent to SEK 9,000m.
Staff costs excluding profit-based compensation increased by SEK 107m or 3 percent mainly due to contractual salary increases. Profit-based compensation increased by SEK 165m due to higher expenses for the profit-sharing and incentive programs.
Other expenses increased by SEK 30m or 1 percent to SEK 4,704m partly due to higher expenses for IT and security.
Loan losses amounted to a net of SEK 71m (–499).
The number of full-time positions decreased by 3 to 6,236.
- Graphs
- Customer satisfaction, Private Customers, according to Swedish Quality Index
- Lending, Swedbank mortgage
- Market share, net new savings*
- Number of bank cards and purchases
- Number of card purchases per customer and month
- Deposits
- Return on equity
My mobile phone says yes!
Swedbank’s “Quick Balance” service is an easy way to get your account balance directly by mobile phone.
The bank has 3.5 million cards in issue. Though designed to suit various lifestyles and needs, they all make it easier to manage your personal finances.