Bank 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, Svenska Handelsbanken AB, SEB AB and Swedbank AB, 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.

Funding Pressure

The bank’s retail ambitions will help drive its deposit-to-loan ratio as high as 30 percent, from 13 percent today, and make it less reliant on wholesale markets, Oestlund said. S&P today removed SBAB from CreditWatch negative, and affirmed the lender’s ratings.

“We now believe the bank has a more conservative and credible plan to reduce its reliance on short-term funding and to strengthen its liquid reserves,” S&P said today. The rating company also said “the adjustment process will be challenging.”

SBAB is targeting growth as Financial Markets Minister Peter Norman commits to the government’s long-term goal of selling the bank. Sweden today sold its remaining 7 percent stake in Nordea for 21.6 billion kronor ($3.4 billion) to lower national debt, saying that the state’s role is not to own banks but to regulate them.

“We’ve been very clear from the government when it comes to SBAB,” Norman told reporters today. “We intend to try to sell SBAB. We don’t currently have a majority in parliament and it then becomes our responsibility as the owner of SBAB to develop the bank as well as possible, to make it more attractive to sell when we perhaps get a majority in parliament.”

Banks Fall

Prime Minister Fredrik 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.

Swedish bank stocks fell today, with Nordea losing 2.9 percent as of 2:02 p.m. local time. Swedbank declined 2.7 percent, SEB dropped 1 percent and Handelsbanken lost 2.3 percent. The 44-member Bloomberg index of European banks slipped 0.3 percent.

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.

Among Sweden’s four biggest banks, Handelsbanken has the most satisfied customers, with a score of 75.2 out of 100 in Svenskt 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.”

(Updates with S&P comment in ninth, 10th paragraphs, government comment in 12th.)
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