Handelsbanken through history

Handelsbanken was founded in 1871 and is the oldest share on the Stockholm Stock Exchange

1871 – 1914 Stockholms Handelsbank

Stockholms Handelsbanks first branch office.

The bank began operations on 1 July 1871 at Kornhamnstorg in the Old Town district of Stockholm, which was then the commercial and financial centre of the city.

At that time, most commercial banks in Sweden were “private” (Swedish: enskilda) banks, where the owners were jointly and severally liable for the bank’s commitments. Handelsbanken, on the other hand, was founded as a limited company from the beginning, with the owners having limited liability.

Handelsbanken’s shares were first listed on the Stockholm Stock Exchange in August 1871. A couple of years later, the first branches were opened in Stockholm: in 1876 in the Södermalm district (Götgatan 16), 1878 in Norrmalm (Fredsgatan 32), and in 1882 in Östermalm (Humlegårdsgatan 24). The Bank opened a branch in Jönköping in 1874, but it was closed in 1895.

In 1893 the banker Louis Frænckel became the new managing director of Stockholms Handelsbank. Under his leadership, Handelsbanken advanced its position in relation to its competitors. When Frænckel took over as Managing Director, Stockholms Handelsbank was the tenth largest commercial bank in Sweden; when he died in 1911, Handelsbanken was the country’s second largest commercial bank.

In the autumn of 1896, the Head Office was moved from the Old Town, first to Gustav Adolfs torg, and then, in 1905, to the newly completed bank building at Kungsträdgårdsgatan, where the Bank’s Head Office is still located today.

1914 - 1969 Stockholms Handelsbank expands to become Svenska Handelsbanken

Bankkontoret i Härnösand — Stockholms Handelsbanks kontor i hörnet av Nybrogatan och Köpmangatan i Härnösand.

At the outbreak of the First World War in 1914, Stockholms Handelsbanken still had seven branches – all located in central Stockholm. However, the new bank management who took up their positions in 1912 saw many advantages in expanding the branch operations to other parts of the country.

In the 1914 - 1919 period, several major acquisitions of provincial banks in northern and southern Sweden were made. In this way, Stockholms Handelsbank built up a nationwide network of branches, and in 1919, the Bank’s name was changed to Svenska Handelsbanken.

Two serious crises occurred in the inter-war years: the deflation crisis in the early 1920s and the Kreuger crash in 1932.

In the early 1920s, Ivar Kreuger’s corporate Group was a large borrower from Handelsbanken, but after the management change in 1923, Handelsbanken was more cautious in its dealings with Mr Kreuger, and in the late 1920s, the only major dealings the Bank had with him related to Svenska Cellulosabolaget (SCA). After the Kreuger crash in 1932, Handelsbanken became by far the largest owner of SCA – it was a subsidiary of the Bank right up until 1950, when it was sold to the Bank’s shareholders and listed on the stock exchange.

During the financial crises of the 1920s and 1930s, Handelsbanken took over majority shareholdings in several Swedish industrial companies in order to protect its claims. In the winter of 1943/1944, the Bank formed a holding company called Industrivärden, to which shareholdings in seven companies were transferred. The new company was listed on the stock exchange in 1945 by the Bank’s shareholders being allowed to subscribe for shares in Industrivärden.

In the post-war years Handelsbanken’s expansion continued, including acquisitions of provincial banks all over Sweden. Alongside its traditional commercial banking operations offering lending and deposits, Handelsbanken broadened its operations at an early stage to include more product areas. In 1955, the mortgage company SIGAB was purchased, which subsequently changed its name to Handelsbanken Hypotek. In 1963, Handelsbanken was the first Swedish bank to form a finance company, which provided leasing and factoring services. In 1973, this company’s name was changed to Svenska Finans, and since 1991 it has been called Handelsbanken Finans. In 1971, Handelsbanken took over as the general agent for sales of the “Koncentra” funds from Åhlén & Holm AB. This was the start of the mutual fund operation, Handelsbanken Fonder.

During the 1950s and 60s, Handelsbanken opened many new branches. Most of these were in the new suburbs of Stockholm, which were expanding rapidly, due to the substantial movements in population at that time.

However, in the late 60s, the Bank was affected by events that caused negative publicity in the media and brought criticism from public authorities: in 1966, the takeover of a well-known travel company, and in 1969, foreign exchange transactions that contravened the strict currency regulation of that time. However, the epilogue to these years of crisis would spur the rejuvenation of Handelsbanken.

1970 - 1985 a new business model, but on a regulated market

In the late 1960s, Handelsbanken ran into a crisis. The management resigned, and in early 1970, Jan Wallander was recruited from the Norrland provincial bank Sundsvallsbanken to be the new CEO of Handelsbanken. Mr Wallander introduced new ideas which Sundsvallsbanken had started to practice. A decision was made to extensively decentralise Handelsbanken’s organisation. But in order to meet the requirements from larger customers, the branches needed specialist support, The Bank’s branch operations were therefore divided into eight regional banks, each consisting of about 70 branches. The new regional banks had their own boards and a high degree of independence.

The new organisation would focus on profitability rather than volumes. The goal was, and still is, to have a return on equity that exceeds the average for the other listed banks. From having lower profitability than its competitors in the late 1960s, Handelsbanken managed to achieve the same level of profitability as the other banks in 1971. Every year since 1972, Handelsbanken has met the goal of being more profitable than the average for other listed banks.

A condition for achieving better profitability than other banks on the same market and working under the same conditions is that Handelsbanken employees outperform their peers in the rest of the sector. Consequently, the Bank’s management thought it was reasonable that employees shared in these extra profits. At the time, there was lively debate in Sweden on how employees could gain more influence in companies. In February 1973, the Board decided to allocate SEK 10 million to a profit-sharing foundation called Oktogonen formed by the Bank’s trade union club. The funds were invested in Handelsbanken shares, thus giving the employees owner representation on the Board. The managed funds were not paid out directly but instead on retirement, which made Oktogonen a knowledgeable and long-term major owner. The Bank’s good profit development facilitated new allocations in the next few years and a large part of the funds were invested in Handelsbanken shares. Since 1998, Oktogonen has owned around 10 per cent of the voting rights in Handelsbanken.

1986 - 1999 Deregulation and expansion in the Nordic region

Since the Second World War, the Swedish banking market had been tightly regulated. In the mid-1980s, it became increasingly clear that government regulations for banks’ lending were an ineffective approach, as greater proportions of credit started to be granted outside the banking system. The Swedish banking market was therefore deregulated during the latter half of the 1980s.

As a result of this deregulation, Swedish banks’ lending increased very sharply, and much of this lending went into speculative investments; in the early 1990s, this resulted in a very serious financial crisis. The Swedish government’s costs for supporting the bank sector were extremely high.

During the banking crisis, Handelsbanken was the only major Swedish bank that was not forced to discuss applying for government aid. Handelsbanken was able to use the situation to advance its position on the Swedish banking market. Among other things, the Bank acquired the major mortgage loan player Stadshypotek in 1997.

Swedish foreign currency regulations were lifted in 1989, and a few years earlier it had become possible for Swedish banks to open branches abroad. In 1989, Handelsbanken opened its first branch in Norway. Through a combination of organic growth and acquisitions, Handelsbanken was able to take advantage of the historical opportunity for expansion created by the banking crisis in Norway in the early 1990s. In the 1990s, the Bank created a nationwide branch network in Norway, supplemented by the purchase of Bergensbanken in 1999.

In 1985, the Bank opened a representative office in Helsinki, Finland. Five years later, in December 1990, a subsidiary was formed, which was converted into a branch in August 1991 to gain full access to the parent company’s balance sheet. This marked the actual start of Handelsbanken in Finland. The first street-level branch was established at Eteläranta in Helsinki in 1993, and it opened in February 1994.

In Denmark, a representative office was opened in Copenhagen in 1990. Handelsbanken’s first Danish branch opened for business in 1996. In 2001, Handelsbanken purchased Midtbank, which had a very strong presence in the Danish region of Jutland, and in 2008, Handelsbanken acquired Lokalbanken i Nordsjælland A/S, with branches in a very attractive part of Denmark.

On 1 January 1998, branch operations in Norway, Finland and Denmark gained the status of separate regional banks, after which their business was run on the same principles as in Sweden.

2000 - Satisfied customers in six home markets

In the early 1980s, Handelsbanken started banking operations in the UK. Initially, operations focused on Nordic-related corporate business, but in autumn 1999, the Bank decided to expand its operations and offer individual and corporate customers in the UK a broad range of banking services. Several branches were opened in England, Scotland and Wales. In mid-2002, the British operations gained the status of a regional bank, and thus the UK became Handelsbanken’s fifth home market, with operations based on the same principles as the branch operations in the Nordic countries. In autumn 2015, the opening of the 200th UK branch was announced.

At the beginning of 2007, Handelsbanken began working on reducing the risks in its operations in order to reduce volatility. Among other things, this resulted in the Bank divesting the occupational pension company SPP in autumn 2007. This period also saw the start of the worst global financial crisis since the major depression of the 1930s.

In 2008, the Swedish National Debt Office was given the mandate to provide government guarantees for bank funding. Handelsbanken was the only one of the four major Swedish banks which did not need any kind of support from the tax-payers. Nor did it need to ask its shareholders for additional capital through a rights issue. Of the four major Swedish banks, only Handelsbanken created positive shareholder value during the turbulent five-year period between 2007 and 2011.

Handelsbanken became the first Nordic bank to start up in the Netherlands when it opened a branch in Amsterdam in June 2002. At the beginning of 2013, when the Bank had 13 branches in the country, it was decided to make the Netherlands Handelsbanken’s sixth home market. Since then, it has been run according to the same principles as the branch operations in the Nordic region and the UK.

For many years, Handelsbanken has had more satisfied customers than the average for the banking sector in all six of the Bank’s home markets. Satisfied customers do more business, and therefore Handelsbanken is a bank that is still showing growth after almost 150 years.