‘Old’ is the new thing in banking for the UK boss of Sweden’s Handelsbanken
When I first saw this in the “Daily Telegraph” I had to look three times to make sure I wasn’t dreaming, I mean a bank that doesn’t take the Mickey out of it’s customers, a bank that actually lends business’s money, a bank who has survived here other banks have failed and had to be bailed out, and why?
One of the main reasons why is the Guy in charge running it here in the UK,and there approach to business, everyone gets a share of the profits, but here is the best idea, its not paid in cash its normally paid in shares and when the person retires, no big fat cat salaries, no big obscene bonus payments,nothing,just good old fashioned, honest banking, something the British banking fraternity has lost contact with, I urge the bank chiefs and the government to take note of the way “Handelsbanken”operates and learn.
He eschews the trappings of wealth, driving a four-year old Audi and schooling his son not at an elite public school but at Manchester Grammar. “There are 1,300 students and Mattias is the only Swede,” he says, proudly.
And then there are his comments about the bank’s financials. “How much of your lending is to individuals and how much to businesses?” I ask. Bouvin looks perplexed. “That’s not very interesting to me,” he says, before rummaging through his papers to find the answer (25pc to individuals, 75pc to corporates). Later, he remarks: “If you were to ask me what sales will be next year, I’d have no idea.”
At first impression, Bouvin seems to be taking laissez-faire management to a whole new level. But Handelsbanken, Sweden’s second largest lender with £210bn of assets and a £12bn market cap, is no ordinary bank. With a local focus on branches and customers, it harks back to a bygone era of Captain Mainwaring and bowler hats. However, dismissing Handelsbanken as “old fashioned” does no justice to its remarkably modern philosophy.
By devolving responsibility down to branch managers and turning the head office into a “support centre”, it is the archetypal “Big Society” bank in all but name.
“We are different, even in Sweden,” Bouvin says. “This boils down to a fundamental humanist view. We believe that if you put trust in people, people will respond in a positive way and take responsibility and deliver results that they would not have achieved in a command and control environment.”
He admits it sounds “corny”, but it’s not just flaky ideology. Handelsbanken puts its words into action. “96pc of all credit decisions are taken by the branch managers,” Bouvin says. “Handelsanken couldn’t be more different to a UK high street bank. When do you meet a decision-maker at a high street branch?
“The head office is there to support the branches. We don’t tell them what to do. We don’t offer any targets or budgeting . . . Other organisations look at business transactions, volumes. We have no volume goals, no profit goals, no timetable. We do things differently.”
It works, says Niels Kroner, a former McKinsey consultant who so admired the Handelsbanken model that he wrote a book about it in 2009,A Blueprint for Better Banking. Handelsbanken was the only large domestic lender to survive the Swedish banking crisis of 1992 without direct state help – mainly due to its better lending decisions. According to Kroner, 86pc of the difference in loan losses between Handelsbanken and its competitors was due to “better customer selection”.
Bouvin, who oversees all 97 of Handelsbanken’s UK branches and 800 staff, lives and breathes its ethos. He joined the export finance department 26 years ago straight out of university. “It was a very, very good job,” he says, but he could see that careers were made in the branches. “I made up my mind I wanted to work as a cashier.” So he joined a Stockholm branch and began his path to manager.
For all its antiquated attributes, the 140-year-old lender’s conversion to “old fashioned” banking was relatively recent. Its modern history started when Jan Wallander took over as chief executive in 1970.
At the time, Bouvin says, Handelsbanken looked much like its peers today. “It was a pyramid structure with decisions made in the head office and communicated down to the branches. They were set targets. It didn’t work very well . . . The bank was in trouble.”
Wallander started by scrapping the many goals being juggled by his predecessors and replacing them with a single simple target: to deliver a higher return on equity than the average of its peers. He then decentralised the bank, believing that by empowering his staff they would outperform rivals.
He was right. For 39 years straight, Handelsbanken has delivered better than average returns and emerged from two crises, in 1992 and 2008, unscathed.
Devolving power to branch managers, as the bank readily admits, does expose it to potential abuse. But it has stuck to its principles, being careful to select the right staff and monitor and coach them frequently. That’s Bouvin’s role, as well as responding to requests for new products and thinking more broadly about strategy.
Wallander also put in place a unique incentive structure. No one is paid a bonus, bar the few staff in the small investment bank (and even then it’s grudgingly “because of the market”, Bouvin notes). Instead, they earn a “competitive salary”, Bouvin says, and are given attractive benefits. Pay is the same for branch managers as at head office, which presumably explains why he gets “two or three unsolicited approaches” a day by branch managers from rivals looking to defect.
The closest Handelsbanken comes to an incentive scheme is Oktogonen, the foundation Wallander set up for the staff. He argued that, if the bank produced better than average returns, a third of those should go to the employees – each getting an equal share, be they the chief executive or a cashier.
At the time, it was hugely controversial. The Cold War was raging and Sweden felt under threat as Soviet submarines patrolled its waters. Wallander was accused of trying to “sneak in Socialism”, Bouvin recollects. He won out, though, and Oktogonen has made some staff very comfortable. Unlike bonuses, however, the awards – largely invested in Handelsbanken stock – are not released until retirement.
“It steers staff towards long-termism. So it’s in the interest of employees to do the right thing until you retire,” Bouvin says.
Handelsbanken may not be a household name, but it is revered in the corridors of power in the UK. Mervyn King and his colleagues at the Bank of England are said to be admirers and, during the crisis, wanted it to become more influential. It may also be in the running for Northern Rock.
Bouvin won’t be drawn, but points out that he did buy a larger rival when running the Danish operation. Northern Rock, with £20bn of assets, would be a big deal for Handelsbanken, which discloses just £6.6bn of UK “general public lending”. Perhaps tellingly, though, when I point out that Handelsbanken has more UK branches than Northern Rock (76), Bouvin murmurs: “I didn’t realise that.”
Even without acquisitions, Handelsbanken is growing rapidly in the UK. Since September 2008, it has opened 44 branches – making Britain the group’s second largest region. Bouvin says the opportunities here are plentiful.
“UK customers find our model particularly appealing, because no one else offers it,” he says. “They say it’s ‘banking like it used to be’ . . . where a customer can meet a decision-maker. With us, they are not sent to an anonymous call centre. Customers like that.” It’s a simple philosophy, but it works.
Job: Chief executive, Handelsbanken UK
Family: Married, one son
Hobbies: Queens Park Rangers Football Club
Current book: Life by Keith Richards