Banking World’s Ikea Born in Sweden Challenging Deposit Giants

Banking World’s Ikea Born in Sweden Challenging Deposit Giants

Sweden’s state-backed mortgage lender wants to take retail customers from the nation’s biggest banks as it targets as much as $14 billion in deposits. SBAB plans to more than double its share of Sweden’s savings market to as much as 6 percent in the coming years, from today’s 2 percent, Chief Executive Officer Carl-Viggo Oestlund said yesterday in an interview at the bank’s headquarters in Stockholm. Oestlund predicts the bank’s deposit base will rise as high as 90 billion kronor in coming years ($14 billion).SBAB will offer higher savings rates as part of a plan to challenge the dominance of Nordea Bank AB (NDA), Svenska Handelsbanken AB (SHBA), SEB AB and Swedbank AB (SWEDA), Oestlund said. SBAB estimates households in the largest Nordic economy have lost 10 billion kronor this year because Sweden’s biggest banks paid too little on their deposits. SBAB’s expansion in retail banking will include bank cards, salary accounts and other transaction services, a transformation the bank estimates will take 12 months.

“We will think as normal retailers,” Oestlund said. A bank should be able to “become a much-appreciated company” in people’s perceptions, in the same way Ikea is, he said. “There is a systematic fault in Sweden’s banking system that we will attack, and that starts with the customer.”

SBAB is offering 2.45 percent on savings for clients that already have their mortgages with the lender. Customers without mortgage contracts at the bank will get 2.2 percent.

Rates Competition

SEB, Sweden’s fourth-biggest bank by market value, offers no interest on regular private accounts, 0.55 percent on savings accounts and 1.8 percent on savings that are tied up for three months, according to its website. Nordea, Scandinavia’s biggest bank, offers customers 1.86 percent on three-month accounts and 2.25 percent if they tie their savings up for two years. At Handelsbanken, rates vary from 0.1 percent to 1.45 percent.

While SBAB plans to use higher rates to win market share, the lender also needs deposit funding to protect its credit rating. Standard & Poor’s on July 19 placed SBAB’s A long-term and A-1 short-term credit ratings on review for a possible downgrade citing concerns over the bank’s reliance on short-term funding.

S&P said then SBAB’s “efforts to improve the matching of assets and liabilities are behind those of both international and domestic peers,” and that it’s “increasingly concerned that government support would not fully mitigate the risks associated” with “high shares of short-term funding.”

Ratings Effect

The bank’s retail ambitions will help drive its deposit-to-loan ratio as high as 30 percent, from 13 percent today, Oestlund said.

SBAB is targeting growth as Financial Markets Minister Peter Normansignals he remains committed to the government’s long-term goal of selling the bank.

Prime MinisterFredrik Reinfeldt’s government earmarked SBAB for divestment after coming to power in 2006, as part of a broader strategy to sell state assets and reduce debt. Sweden yesterday started the process to sell its remaining 7 percent holding in Nordea.

Oestlund’s goal of becoming Sweden’s banking Ikea sets the bar high. The furniture retailer was among the nation’s four most-respected companies in 2013, together with Google Inc., according to a survey of 15,000 people by Nordic Brand Academy.

Satisfied Customers

Among Sweden’s four biggest banks, Handelsbanken has the most satisfied customers, with a score of 75.2 out of 100 in Svenska Kvalitetsindex’s ranking for 2012.

Though SBAB plans to offer higher deposit rates than Sweden’s biggest banks, Oestlund said there’s more to winning market share than pricing.

“Prices won’t be our way to get into the market and neither will distribution channels or marketing,” he said. “Where we can make a real difference is on the customer experience; that’s what we will add to the market and that’s where there is a big gap that we can fill.”

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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