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Title: CONSUMER LENDING IN SWEDEN


1

CONSUMER LENDING IN SWEDEN Analysis July 14,
2003
Analyst Commentary
Notice This Executive Briefing Report
presentation is compiled from the World Wide Web
and other sources solely for internal use by the
client for the specific and limited informational
and research purpose described above. Crystalyse
Services locates and organizes this information
so that the clients can directly access the
sources and proceed with their own analysis and
evaluation. Crystalyse Services does not espouse
any opinion or make any recommendations as to the
significance of the data provided or its use by
the client. Nor does it make any representation
regarding the accuracy or completeness of the
information selected.
2
TABLE OF CONTENTS
  1. EXECUTIVE SUMMARY
  2. FINANCIAL INFORMATION
  3. CORPORATE INFORMATION
  4. PRODUCT PORTFOLIO
  5. MARKET INFORMATION
  6. SOURCES

3
I. EXECUTIVE SUMMARY
  • Swedish economy has stabilized in terms of
    growth. In fact, GDP growth is expected to leap
    to 2.7 from the current 1.4 to 1.5 levels. It
    compares favorably with rates in Germany and
    EU-15 countries though it lags behind that of the
    US. Inflation is expected to stabilize after 2003
    summer and see a temporary decline in 2004. But
    business investment is expected to go down in
    2003 for the third consecutive year.
  • Households seem optimistic. Retail sales rose
    3.7 in Q1 2003 yoy. During the same period, car
    sales were 8 higher, though wage rate increase
    is expected to decelerate in 2003. In 2004, wage
    rate is expected to rise by 4. Unemployment rate
    may dip slightly to 4.4 in 2004 from 4.3 in
    2003.
  • Four big banks - Svenska Handelsbanken, Nordea
    Bank Sweden, Skandinaviska Enskilda Banken (SEB)
    and FöreningsSparbanken (known internationally as
    Swedbank) - account for most of the deposits and
    loans in the banking sector. Merger moves among
    the big four in the past did not fructify. SP
    does not expect mergers in the near future.
  • Household borrowing has been rising compared to
    general public borrowing. Households account for
    only about 20 of total lending by banks and 40
    of loans of mortgage institutions. Credit cards
    are less popular compared to debit cards. There
    are fewer bank branches now thanks to
    increasingly popular alternative distributions
    channels like phone banking and Internet banking.
    In 2000, Giro payments accounted for 7562 bn SEK
    or 94 of account based retail payment
    instruments. Global giants GE Capital and
    Citibank occupy 9th and 32nd position among
    lenders in the retail segment.


4
II. SWEDISH ECONOMY
  • The Swedish economy and political environment are
    marked by stability. Swedish Central Bank
    Riksbank forecasts a 1.4 GDP growth rate in
    2003. Investment bank Nordea Market expects a
    marginally higher GDP growth of 1.5 in 2003,
    projecting it even higher at 2.7 in 2004.
  • Services accounted for 44 of employment and 70
    of the GDP.
  • Sweden is getting ready for a referendum on
    joining the EMU in September 2003. Nordea Markets
    expects Sweden to join the EMU in early 2004.
  • Inflation is on target. It is expected to
    stabilize after 2003 summer and see a temporary
    decline in 2004.
  • Business investment is expected to decrease in
    2003 for the third consecutive year. Building
    investment in 2003 will remain at the same level
    as 2002, with the public sector offsetting the
    decrease in private sector investment.
  • Households seem optimistic. Retail sales rose
    3.7 in Q1 2003 yoy. During the same period, car
    sales were 8 higher, though wage rate increase
    is expected to decelerate in 2003. In 2004, wage
    rate is expected to rise by 4 according to
    Nordea.
  • Unemployment rate is likely to rise from 4 in
    2002 to 4.5 in 2003 but dip to 4.4 in 2004.

5
II. SWEDISH ECONOMY HOUSEHOLD LOAN GROWTH
  • Household borrowing has been rising compared to
    general public borrowing while business borrowing
    has declined markedly.

6
II. SWEDISH ECONOMY GDP
  • Swedens GDP growth rate has been lagging behind
    the US rate for the last two years. But it
    compares favorably with GDP growth rates of
    Germany and the EU-15 countries.

Figures for 2003 are forecast
7
II. LENDING ENVIRONMENT
  • According to Riksbank, fie types of lenders
    extend credit to the general public, with banks
    and mortgage institutions accounting for 87 of
    loans.

Type of lender Loans to general public (SEK bn)
Banks 1,345
Mortgage institutions 1,126
Other credit market companies 307
Securities companies 6
Insurance companies 46
Total 2,830
General public includes non-financial companies,
municipalities, non-residents and households
8
II. LENDING ENVIRONMENT BANKS
  • Swedish Banking System is resilient and is
    well-equipped to handle further economic
    downturn.
  • There are no apparent systemic risks. Regulation
    and supervision are in line with international
    standards.
  • At the end of 2001, there were 128 banks
    operating in Sweden. Of these 26 are public
    limited banking companies, 77 are savings banks,
    23 are foreign-owned banks and 2 are co-operative
    banks.
  • Four universal banks hold more than 85 of loans
    and deposits, but margins remain low as there are
    new entrants. The top ten banks account for
    almost 95 of balance sheet total.
  • The big four are Svenska Handelsbanken, Nordea
    Bank Sweden, Skandinaviska Enskilda Banken (SEB)
    and FöreningsSparbanken (known internationally as
    Swedbank).
  • There has been consolidation in the Swedish
    banking industry via mergers and acquisitions
    since the second half of the 1990s. The merger of
    two of the top four banks was called off in 2001
    due to restrictive conditions placed by the EU.
    SP does not expect further mergers.
  • Alternative distribution channels such as
    telephone banking and Internet banking have come
    up. Consequently the number of branches has come
    down from 3,700 in 1980 to 1,900 in 2001.
  • New retail banks such as Ikanobanken and ICA
    Banken are wholly-owned by parent companies.

9
II. LENDING ENVIRONMENT BANKS
Top Ten Lenders in 2001
  • About 20 of total bank lending is to households,
    which includes unincorporated enterprises.

Bank Lending to the public (SEK mn)
Handelsbanken 414,485
SEB 223,357
Swedbank 211,473
Nordea Bank 180,451
Danske Bank 85,187
Postgirot Bank 18,792
SkandiaBanken 15,470
ABN AMRO 19,325
GE Capital Bank 18,392
Dexia Crédit 16,229
Households includes unincorporated enterprises
Notes 1) Lending to the public includes
households, companies and local governments 2)
Postgirot Bank was acquired by Nordea in December
2001
10
LENDING ENVIRONMENT MORTGAGE INSTITUTIONS
  • The top four banks control 87 of the
    mortgage market.
  • SBAB is a state-owned company with 11 share.
  • 65 of Spintabs loans are to private
    individuals.
  • After banks, mortgage companies are the second
    largest lenders to general public in Sweden.
  • There are 10 mortgage finance institutions, most
    of which are owned by the banks. Two companies
    are state-owned.
  • About 40 of the lending is to businesses.
    Household lending accounts for 60 of lending.

11
LENDING ENVIRONMENT OTHER CREDIT MARKET COMPANIES
  • Other credit market companies include finance
    companies, corporate and municipality-financial
    institutions.
  • There are 60 finance companies in Sweden,
    offering products like leasing and factoring to
    companies, and promissory note loans and credit
    cards to individuals. Some of these are owned by
    banks, with the big four having a presence even
    here.
  • The top three companies are corporate financial
    institutions.
  • The finance companies extend loans for auto/boat
    purchases and cards.

Company Balance Sheet Size (SEK bn)
Svensk Exportkredit 150
Kommuninvest i Sverige 48
Landshypotek 35
Nordea Finans Sverige 29
Handelsbanken Finans 29
Volvofinans 24
SEB Finans 22
Föreningssparbanken Jordbrukskredit 19
ABB Credit Finans 10
Telia Finans 9
Total 10 largest 375
Total other credit market companies 468
12
LENDING ENVIRONMENT CREDIT CARDS
  • The usage of credit cards is low in Sweden at 68
    bn SEK in 2000. There is a preference for debit
    cards, which also offer lines of credit to
    customers.
  • In 2000, Giro payments accounted for 7562 bn SEK
    or 94 of account based retail payment
    instruments.
  • Of the 490 bn SEK, the break-up is shown below

Source Data Monitor
Source Riksbank
13
PLAYERS SVERGIA HANDELSBANKEN
  • Svergia Handelsbanken
  • This is the largest bank in Sweden with a balance
    sheet size of SEK 1277 bn in December 2002 and
    lending assets to general public of SEK 839 bn.
    It is a universal bank with a mortgage company,
    finance company and also has presence in asset
    management, investment banking, pension and
    insurance.
  • Its has outstanding loans of SEK 284 bn to
    private individuals, bulk of it - SEK 234 bn in
    December 2002 in mortgage loans.
  • Finance company Handelsbanken Finans had loans to
    individuals amounting to SEK 4.7 bn.
  • It has grown through acquisitions. It acquired
    Skanska Banken in Sweden and Oslo Handelsbank in
    1990. In 1992, it acquired life insurance company
    RKA and parts of Skopbank in Finland. In 1996, it
    purchased Swedish mortgage company Stadshypotek.
    In 1999, it bought Bergensbanken in Norway and in
    2000, it acquired insurance company SPP Liv. In
    2001, it acquired Midtbank.

14
PLAYERS SEB
  • Skandinaviska Enskilda Banken (SEB)
  • This is the second largest bank with a balance
    sheet size of SEK 1241 bn in December 2002. It
    has presence in mortgage, finance, investment
    banking, asset management, insurance and pension.
  • It has outstanding loans of SEK 230 bn to
    households in December 2002.
  • This bank was formed when Stockholms Enskilda
    Bank and Skandinaviska Banken merged in 1972. In
    1997, it acquired Trygg-Hansa Insurance. In 2000,
    it acquired BfG Bank in Germany. It also acquired
    a bank each in Latvia, Estonia and Lithuania in
    1999 and 2000. Other acquisitions include Diners
    Club Nordic (1994), private bank Gyllenberg,
    Finland (1997), Orkla Finans in Norway (2000) and
    the Eurocard brand company Europay in Norway
    (2002).

15
PLAYERS SWEDBANK
  • FöreningsSparbanken (SwedBank)
  • This bank is the largest retail bank with a 30
    market share in retail. It has presence in
    mortgage, finance, investment banking, asset
    management and insurance. It has a balance sheet
    size of SEK 957 bn in December 2002.
  • It has outstanding loans of SEK 306 bn to
    households in December 2002, of which mortgage
    loans through its mortgage company Spintab amount
    to SEK 248 bn.
  • Its finance subsidiary had loans to households
    amounting to SEK 2.2 bn.
  • SwedBank was formed when Föreningsbanken and
    Sparbanken Sverige merged in 1997. It has
    subsidiaries in mortgage, finance, investment
    banking, and asset management. It has 25 stake
    in two banks, each in Norway and Finland. It
    subsidiary Hansabank is present in the Baltic
    states and the Denmark subsidiary specializes in
    business financing.

16
PLAYERS NORDEA
  • Nordea Bank
  • Nordea Bank is part of the pan-Nordic Nordea
    group. Nordea Bank Sweden had a balance sheet
    size of SEK 607 bn.
  • It has outstanding loans of SEK 153 bn to
    households in December 2002.
  • This bank was formed when Föreningsbanken and
    Sparbanken Sverige merged in 1997.
  • It acquired the post office-owned bank Postgirot
    Bank, which was merged with Nordea in 2002. It
    also divested from some of its insurance
    investments in 2002. It has presence in
    investment banking, insurance, asset management
    through the group. It also has a finance company
    in Sweden.

17
PLAYERS THE NEW PLAYERS
  • GE Capital Bank became the 9th largest bank in
    2001 from 14th in 2000. It is a niche player
    specializing in small consumer credit. It
    provides consumer loans, affinity loans to
    members of a affinity groups such as a teachers
    association, sales finance (closed-end secured
    and unsecured personal loans) and credit
    insurance, to protect consumers if they
    experience payment hardship. In 2001, its lending
    stood at SEK 18 bn. It has three branches, 440
    employees and operates through a distribution
    channel
  • Citibank is a small player, ranked 32nd in 2001
    with a loan portfolio of SEK 1 bn. It provides
    auto loans and issues credit cards. It had one
    branch and 29 employees and operates through a
    distribution channel.
  • A few new players such as Ikano Bank,

18
Sources
  • Swedish Finance Ministry
  • Link to Finance Ministry
  • Swedish Central Bank
  • Link to Sveriges Riksbank
  • Statistics Sweden
  • Link to Statistics Sweden
  • Swedish Bankers Association
  • Link to Swedish Bankers Association
  • Dialog
  • LexisNexis
  • Swedish Banks
  • Link to Handelsbank
  • Link to SEB
  • Link to ForeningsSparbanken
  • Link to Nordea Bank
  • Link to GE Capital Bank
  • Link to Citibank
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