Swedbank ‘not fast enough’ on mortgage lending, causing loss of market share
Amid heavy anti-money-laundering hiring and investments, Swedbank AB (publ) is demonstrating slow response time and a lack of availability elsewhere in its business, causing it to lose market share within mortgage lending in Sweden.
Presenting Swedbank’s first-quarter earnings, CEO Jens Henriksson said the bank is “well-positioned when it comes to pricing” on its mortgage loans but it had been too slow in responding to customers’ needs. As a result, Swedbank had not been able to defend its market position.
“We have not been available … we’ve not been fast enough,” he said on an earnings call April 27.
Mortgages are an important business for Swedbank, accounting for just over half of its total lending. In the first quarter of 2021, the bank took a 16% market share of new mortgage lending in Sweden, according to its earnings report, which Henriksson said “does not match our ambitions.”
“We simply haven’t kept up, and this is an area where we need to improve,” he said, adding that the bank’s aim is to return to its “back book market share.” Swedbank’s share of the total residential mortgage market in Sweden was 23.3% at the end of 2020, making it the biggest player in the market, according to a report by Nordic Credit Rating based on figures from Statistics Sweden.
Growing competition in the Swedish mortgage market has been an ongoing challenge for Swedbank and its shrinking share continues to raise concern from analysts, particularly after a year in which the bank made significant investment and hiring within compliance functions. In 2020, half of the bank’s new hires were anti-money-laundering-related and it now has roughly 1,500 employees exclusively working to combat financial crime.
It comes in light of a scandal linking the Swedish lender to a €200 billion money-laundering case at Danske Bank A/S. An investigation by law firm Clifford Chance found that Swedbank branches in the Baltics processed high-risk payment transactions of roughly €37 billion between 2014 and 2019. The Swedish financial regulator subsequently issued a 4 billion kronor fine to the lender.
One analyst on the first-quarter earnings call questioned whether Swedbank’s growing focus on anti-money laundering had caused it to “forget about the client.”
“Of course the [anti-money-laundering] problems have affected us. And we are spending a lot of time and effort and we are hiring people here … I agree that there’s been a weakness, but when we reach the customers, we do business,” Henriksson said.
In order to increase its share of new mortgage lending in Sweden, Swedbank has reallocated resources to provide faster feedback to customers, Henriksson said. The bank has already made the loan approval process quicker during the quarter and cut response time by 50%, he said.
Swedbank’s share price fell more than 4% in early trading April 27, despite the lender having posted a first-quarter profit attributable to shareholders of 4.98 billion kronor, compared to a loss of 1.69 billion kronor a year ago.
The results were driven by factors including a 47% year-over-year drop in expenses, after the previous year’s figure was impacted by the one-off 4 billion kronor anti-money-laundering fine. Impairments also fell as the bank had taken significant pandemic-related loan loss provisions a year earlier.
As of April 26, US$1 was equivalent to 8.38 Swedish kronor.