Handelsbanken Investors Demand More Transparency From Swedish Bank

(Bloomberg) -- In the fall of 2023, as Svenska Handelsbanken AB searched for a new chief executive officer to replace the departing Carina Akerstrom, bank executives told the external recruiter handling the search they wanted someone who’d carry on her push to invest in technology and make the Stockholm-based lender’s culture more open and transparent.

Instead, Handelsbanken’s board chose Michael Green, who at the time was the general manager of the Bank’s operations in Sweden. He was viewed as a conservative operator and the favored candidate of the bank’s chairman, Par Boman, people familiar with the matter said. Green took over in January 2024, and overturned several changes Akerstrom had been planning, the people said.

The choice of Green is reflective of Handelsbanken’s priorities, according to people familiar with the management of the Stockholm-based lender, speaking on condition of anonymity as they are not authorized to comment publicly. The bank has been slower than rivals to invest in high-growth business lines or technology, preferring to stick to a more conservative strategy of branch-based lending, mortgages and other products whose profitability has waned. While the bank is seen as a stable bet during challenging markets, it generates less profit for investors than its peers and its shares are lagging, which makes a lack of transparency even more frustrating for some of its shareholders.

“Handelsbanken is Sweden’s most tight-lipped and conservative bank,” Sverre Linton, chief legal officer and spokesperson for the Swedish Shareholders’ Association, which represents small stock investors, said. “They’re not as open as other companies with shareholders and have clung to outdated practices.”

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

Other major Swedish banks, including Swedbank AB and SEB AB, pulled back from unprofitable foreign retail ventures years ago, and expanded into funds, cards and corporate services. Handelsbanken has instead hung onto small-scale operations in Norway, the UK and the Netherlands, where it has struggled to gain market share.

The bank has long relied on its branches to generate business, offering relatively simple lending products to a loyal customer base. While that helped it avoid the credit losses suffered by rivals during the financial crisis, the margins on that business have slipped, and the bank has been slow to expand into more advanced products. Over the past two decades, Handelsbanken has dismantled much of its once-strong investment banking arm, but hasn’t invested much in high-return businesses such as asset management. 

“Under Chairman Boman, the bank has been steered in a defensive direction, missing out on opportunities,” said Peter Magnusson, head of asset management at Cicero Fonder, a minority shareholder in Handelsbanken. 

Handelsbanken shares have performed worse than its peers over the past six years, rising just 22%, compared to gains of almost 90% for SEB, 75% for Nordea and more than 65% for Swedbank.

Handelsbanken is heavily concentrated in Swedish mortgages, tenant-owner associations and commercial real estate lending — a model that was highly profitable under earlier Basel capital rules, but became far less so after regulatory changes raised capital requirements. With limited income from fees, asset management or payments, the bank’s earnings are skewed toward low-margin net interest income.

In a note published in September, Citi analysts highlighted that about three-quarters of Handelsbanken’s revenues come from net interest income, making its earnings especially vulnerable in a rate-cutting cycle, with little hedge support and mounting competition from both incumbents and new entrants. Handelsbanken has also lost much of the branch advantage it once enjoyed and ranks poorly on digital services, leaving it in a weak competitive position, the analysts said. Citi was particularly downbeat on the Swedish lender, calling it one of the least attractive banks in Europe at the moment. 

Handelsbanken’s return on equity has been at the lower end of the Swedish banks and is expected to become the lowest level — around 11% through 2026 — Bloomberg Intelligence analyst Mar’Yana Vartsaba said in a note in August.

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

The bank’s more disciplined approach has upsides. It has one of the strongest credit profiles in the sector, with recoveries accumulating since mid-2020 and losses far below peers. Its cautious stance may limit profitability, but it makes the bank a reliable defensive play when markets turn volatile, said Markus Sandgren, equity analyst at Kepler Cheuvreux. “They’re extraordinarily strong on credit risk — a bank investors can rely on in shaky times,” he said. However, Sandgren rates the bank as “reduce,” expecting that investors will seek higher returning assets when the business cycle improves.

Bloomberg research shows that Handelsbanken has more sell recommendations from analysts than its peers, with 12 sell versus 11 buy and hold, compared to Swedbank’s seven sell and 16 buy and hold, and SEB’s five sell versus 18 buy and hold.

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

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

There is one area of the business that has grown, and it’s one that perplexes some of the shareholders. Handelsbanken owns a business media company, EFN, which began as an in-house TV channel in 2011, before being rebranded and spun out as a wholly-owned subsidiary in 2013. 

Akerstrom had decided to close EFN in the last few months of her tenure in 2023, according to people familiar with the situation, who asked not to be identified discussing private conversations. The outlet covers Swedish economy and finance news out of two floors of an office building shared with Handelsbanken Capital Markets in Stockholm, but the then-CEO had decided it had little strategic value to the bank.

Akerstrom didn’t respond to requests for comment.

According to a report in business magazine Dagens Media in April 2024, EFN costs Handelsbanken about 100 million kronor ($10.4 million) a year. Given its recent hires, that sum is likely to have grown, but it’s still small next to Handelsbanken’s total expenses, which rose to 25 billion kronor in 2024 from 23 billion kronor a year earlier.

EFN’s CEO declined to comment and directed Bloomberg News to the Handelsbanken press office. Zanchi said that EFN is part of the bank’s social engagement efforts, with a mission to “spread knowledge about economics and society to a wider audience, which strengthens people’s ability to make their own, well-founded decisions.” Handelsbanken declined to say whether EFN’s budget is earmarked or discretionary, to provide any details on its financial structure, or to comment on its costs or salaries.

Investors and analysts said that they are concerned less about the amount of money that Handelsbanken is spending on EFN, and more about the bank’s reluctance to explain its strategy. Several have asked the bank’s management questions about the media company, in the context of broader conversations about a perceived lack of transparency at Handelsbanken. 

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

People familiar with Handelsbanken’s management say that the roots of Handelsbanken’s conservative approach come from its unusual shareholding structures and by the influence of Boman, who wields more power over strategy and personnel than many chairs, the people said.

Handelsbanken declined to comment on what spokesperson Olsson called “speculations or hearsay.”

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 Aug. 29, is majority-owned by L E Lundbergforetagen AB, controlled by Lundberg. Lundberg declined to comment.

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

Executives who have tried to push for change, such as Frank Vang-Jensen, who was CEO between 2015-2016 , have had relatively short tenures at the bank, the people 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 removed after less than 18 months in the job. Boman, Handelsbanken’s chairman, said that the role had been “too big” and “too hard” for Vang-Jensen.

Vang-Jensen has since become president and CEO of Nordea Bank Abp, the largest bank in the Nordic region measured by total assets. Under Vang-Jensen, Nordea has cut costs, invested heavily in technology, AI and cybersecurity, and expanded its footprint — including via its 2024 acquisition of Danske Bank’s Norwegian personal customer and private banking business. Nordea has increased revenue and market share under his tenure, with top-three market positions across loans and deposits in Sweden, Denmark, Finland and Norway. 

“The way Vang-Jensen was dismissed was exceptionally harsh,” said SEB’s Hakansson. “Ironically, he’s since proved his capability at Nordea, where the share price and return on equity have surged while Handelsbanken has made little headway.”

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