Big banks’ mortgage profits rising

The total net interest for Sweden’s big four banks amounted to around SEK 30 billion for the second quarter – an increase of over one billion kronor since last year. The profits come mainly from mortgages.

“This is a completely unreasonable figure,” says Håkan Larsson, housing economist at the Swedish Homeowners Association. Håkan Larsson says that the development is due to the low repo rate, which has meant there is a huge difference between the interest banks themselves pay and what they offer mortgage customers.

During the same period mortgages have grown in importance for banks. For Swedbank and Handelsbanken, the mortgage share of the group rocketed from 25% in 2010 to 49% and 42% respectively in 2015.

Håkan Larsson points out that the four big banks have very similar interest rates for mortgage customers, calling it a price-fixing cartel. He believes politicians ought to act and the state SBAB bank ought to lead the way by bringing down interest rates.

Top economist predicts worse times

Handelsbanken’s head economist Ann Öberg has predicted an economic downturn just around the corner. In Sweden growth has already hit its peak and unemployment has reached its lowest level, predicts the bank.

Across the entire western world central bank interest rates remain minus or around zero. In combination with record high state, corporate and household debt, this makes an imminent downturn extra frightening, she warns. “Neither the central banks nor fiscal policy have any ammunition for a shrinking economy.”

She also expects unemployment to rise from its current 7% to 7.3% in 2018.

Handelsbanken CEO: “Didn’t meet the mark”

After Handelsbanken’s CEO Frank Vang-Jensen was unexpectedly fired yesterday following only 17 months in the post, chair Pär Boman addressed a press conference to answer why.

The main issue was the bank’s decentralised business model with strong and self-sufficient branches. “Being in charge of Handelsbanken and leading other self-sufficient managers is a very different kind of leadership compared to many other companies,” he said.

Frank Vang-Jensen, as well as planning to reduce the number of branches from 463 to 400, tried to centralise the bank’s operations more than local branch managers could accept. Boman also said, “Frank quite simply didn’t meet the mark to be CEO at Handelsbanken.”

Anders Bouvin, with over 30 years of experience at Handelsbanken, is taking over as CEO.

New CEO for Handelsbanken

Handelsbanken’s CEO Frank Vang-Jensen has been fired. In a press release this morning, the board of the bank said, “a change of CEO ought to take place now”. Chair Pär Boman continued, “The decision is only a question of the individual. Handelsbanken remains strong and our long-term goals are still in place.”

Vang-Jensen has been CEO since March 2015 when he took over from Pär Boman who became chair. Pär Boman says Vang-Jensen’s style of leadership does not match Handelsbanken’s “very decentralised way of working”.

Raised capital requirements for banks

Yesterday the Swedish Financial Supervisory Authority (Finansinspektionen) suggested further tightening of the requirements on banks’ lending to corporates, putting more pressure on the banking sector.

The new rules entail raising the risk weight for corporate lending, which will mean that the average risk weight is expected to exceed 30%. The risk weight determines how much capital the bank must have as a buffer for each krona loaned.

The news hit Handelsbanken in particular, whose shares closed at a minus.

Fresh blow to embattled steel industry

Europe’s steel industry has accused China of dumping products on the market and has called on Brussels to deploy EU trade policy instruments to counter unfair competition. The call has come as the European Commission prepares to announce that it may grant China market economy status as of December 2016. If Brussels does decide to recognise China as a market economy, the EU will be robbed of some of its powers to impose such measures.

In an analysis presented last week, Handelsbanken Capital Markets claimed that China could not be accused of dumping products on export markets since the price of export steel is higher than that of steel sold in China. Mathias Ternell, director of international affairs at the Swedish Steel Producers’ Association, says Handelsbanken’s claim is irrelevant since China is not a market economy; therefore the price of steel on its domestic market has not been set according to market principles.