Handelsbanken, one of the leading advocates in Europe for the importance of maintaining bank branches, has conceded defeat to the rise of online banking and is to close almost half its branches in Sweden by the end of next year.
Known for its church spire principle — under which a branch manager should be able to see all their customers from the top of a tower — Handelsbanken has long resisted the move by the other three large banks in Sweden to cut sharply the number of branches.
But on Wednesday Handelsbanken, which emphasises its long-term and conservative strategy, announced it would close 180 of its 380 branches in Sweden, cut 1,000 jobs and invest SKr1bn ($115m) to boost its digital customer offering.
“It may prove a big step change in people’s perception of Handelsbanken as a bank,” said Adam Barrass, analyst at Berenberg. “The ethos has been that the branch is the bank.”
Handelsbanken is one of the most expensive banks in Europe — currently trading at about 10 times its 2022 earnings — as investors have appreciated its local focus and decentralised model that places responsibility for lending decisions in the hands of branch managers. Despite Brexit, it has expanded rapidly in the UK in recent years, making Britain now its second-largest market.
The Swedish bank said it would give its remaining branches “an even greater degree of decision-making authority” and access to specialist advice. Even with the cuts, it will still have more branches in Sweden than any of its rivals, Swedbank, SEB and Nordea.
Handelsbanken added that the move away from branches and towards more online banking should mean its overall expenses in 2022 are SKr20bn, down from SKr22bn last year. But it added that the cost cuts would result in a contraction in “income” of SKr1bn while it will take a provision of SKr1.5bn in the fourth quarter.
Mr Barrass said: “There should be some positivity from investors that you can’t just stick to your knitting when the environment around you has changed.”
Shares in Handelsbanken rose 2.5 per cent in early trading on Wednesday.
Handelsbanken made the branch closures as part of a strategy review started last year by chief executive Carina Akerstrom and did not mention the current Covid-19 pandemic in the announcement. But Mr Barrass said coronavirus had undoubtedly led to lower footfall to some branches, raising questions over their viability.
He added that the risk for Handelsbanken was over whether it led shareholders to question the reasons why the Swedish lender has outperformed the market for the past four decades ever since it moved to a decentralised model.
“Through a crisis, people are paying up for a bank that outperforms on credit risk because of the branch network,” he said. “The question then is whether investors discount that credit risk might rise from here.”