Massive bonuses for bankers? Not for these equitable Swedes

LONDON LETTER:Handelsbanken is using traditional techniques of local knowledge and measured staff rewards to grow rapidly in Britain. Irish and other banks, please take note

GIVEN THE controversy in Ireland about the €3 million bonus to AIB’s Colm Doherty and the lack of lending by all banks, the experience of Anders Bouvin, head of Swedish bank Handelsbanken’s UK operations is worth heeding.

Besides supporting Queen’s Park Rangers, Bouvin, a 26-year-long veteran with the bank, drives a four-year-old Audi, sends his son to a state school in Manchester and never gets a bonus.

And he runs one of the fastest-growing banking businesses in Britain.

Forty years ago, Handelsbanken was different, run by a hierarchical management, which made decisions in head office and sent targets and instructions to local branches, just like all Irish banks do today.

It did not work. In 1970, the bank got a new chief executive, Jan Wallander, who scrapped the existing structures and gave local managers the freedom to make decisions about lending in communities they were supposed to know.

Dubbed the “church tower principle”, the rules are simple: managers only do business with people that they know and only lend on projects that they have properly investigated. But once they decide to lend, they are rarely subjected to second-guessing by head office.

Since Wallander’s arrival, the bank has delivered better-than-average returns and emerged from two crises unscathed – Sweden’s own one in 1992 which scuppered most of its banking system, and the international one in 2008.

Indeed, it was the only large Swedish bank in 1992 not to need any state help.

“Ninety-six per cent of all credit decisions are taken by the branch managers. Handelsbanken couldn’t be more different to a UK high street bank. When do you meet a decision-maker at a high street branch?

“Customers find our model particularly appealing, because no one else offers it,” he says.

“They say. ‘It’s banking like it used to be’, where a customer can meet a decision-maker. With us, they are not sent to an anonymous call centre.

“The head office is there to support the branches. We don’t tell them what to do.

“We don’t offer any targets or budgeting. Other organisations look at business transactions, volumes. We have no volume goals, no profit goals, no timetable. We do things differently.”

But Handelsbanken is not just different on lending decisions. It ploughs a different furrow on executive bonuses, deemed vital by other banking chiefs, such as Stephen Hester of Royal Bank of Scotland (RBS), to attract talent. Including himself, naturally.

Yesterday, smaller RBS shareholders complained about Hester getting a £7.7 million salary-and-bonus package this year, but the award went ahead when UK Financial Investments – the state body which controls the treasury’s 83 per cent stake in RBS – approved it at an agm.

Hester, who leads a bank that made a £1 billion loss last year, will enjoy a £1.2 million salary, along with a £2 million bonus, plus shares potentially worth £4.5 million, while 323 other staff will share a £375 million bonus pool.

Such moments do not occur in Handelsbanken.

Instead, it has an incentive scheme called Oktogonen, which receives a share of the profits if the bank exceeds the industry’s average profit returns.

Everyone gets an equal share, from the chairman to the cashier, with a few exceptions in its small investment banking arm. Even then, staff do not get it immediately since the sums are largely invested in Handelsbanken stock and not released until retirement.

Given 40 years of profits, Oktogonen has made some staff, who already enjoy competitive salaries and attractive working conditions, very comfortable indeed.

Not surprisingly, Bouvin daily receives CVs from bank managers seeking work.

Honoured already as one of the best companies to work for in the UK, Handelsbanken eschews the long-hours culture so prized by its fellows in the industry, preferring instead that employees look after themselves just as carefully as the bank’s interests.

“We are different, even in Sweden. This boils down to a fundamental humanist view. We believe that if you put trust in people, people will respond in a positive way and take responsibility and deliver results that they would not have achieved in a command-and-control environment,” he said recently.

Bouvin lives with his wife and two children in a leafy village in Cheshire, “near to beautiful countryside”, but also the bank’s northern headquarters at Manchester airport, rather than Manchester city centre because he did not fancy a daily commute through heavy traffic.

In 1982, Handelsbanken had one branch in London. Since 2008 – the date of the Lehman Brothers’ disaster – it has more than doubled its number, without acquisitions.

Today, it has 98 across Britain, soon to go past the 100 mark, managing £6 billion worth of assets.

It is one of the possible bidders for the remainder of Northern Rock – a company as different in creed from Handelsbanken as could be imagined, a gigantic leap for the Swedes.

Bank of England governor Mervyn King is a fan. It is not hard to see why.